Atomico’s State of European Tech 2022 report revealed many stark statistics of the overall tech ecosystem of Europe, including the UK.

In the UK, technology investment saw a 22% drop this year, one of the most dramatic falls in Europe – however, the UK remains the best funded country in the EU, with 35% of all investments in the past five years.

Down from last year’s record $36 billion (£29.6 billion) raised in 2021, UK tech investment fell to $27.9bn (£22.9bn) in 2022. 

UK Seed funding for 2022 was at $2 million (£1.64m), but their Series A funding was at $11.7m (£9.62m). The UK is a larger funding ecosystem, but their Seed funding is lower than both France and Germany. 

Their higher Series A funding shows that investors in the country are willing to provide funds once a company has gained traction, but this wariness could crush valuable tech startups. 

As economic wariness increases and wallets tighten, this funding could spell the difference for the rise or fall of the UK tech ecosystem in the future. 

In comparison to the rest of Europe, the UK still has the highest number of tech unicorns. 

However, while the UK has 35% of all funding, their share of unicorns decreased from 41% to 26% over the last five years, and is losing ground in their unicorn creation rate. 

London is still the largest tech hub in terms of capital investment, though it looks projected to have less money invested in it by the end of 2022 than in 2021. 

The UK has the highest rate of VC funds raised compared to the rest of Europe from 2017 to 2021. VC funds are about twice that of their European GDP weight, making them an outlier compared to the rest of Europe. 

While the UK’s private market ecosystem has risen significantly since 2017, its public market tech value has risen only marginally since 2017. 

Europe as a Whole

Over $400bn (£328.8bn) of value was erased in 2022 in Europe across both the public and private tech markets. The total ecosystem value has fallen to $2.7 trillion  (£2.22 trillion) from its $3.1 trillion (£2.55 trillion) peak in late 2021. 

While total investment levels this year are expected to hit around $85bn (£69.89bn), this is a stark decrease from 2021 which saw the $100bn (£82.2bn) for the first time. While it is still a decline from last year, it is still more than any other year besides 2021 – a noteworthy outcome considering the tough macroeconomic environment. 

The projected $85bn (£69.89bn) is over two times the total capital invested in 2020, showing that this one year decline may not necessarily be repeated. 

Europe’s year was in two halves: the record breaking investments of 2021 carried into the first half of 2022, with investment levels up 52% by the end of the first quarter. 

It was in July, however, that investment cooled off, and by the third quarter of 2022, investment was down more than 40% compared to the same period in 2021. 

Europe’s investment in tech is finally catching up with their GDP. Previously its investment has been small in proportion, but in 2022, the tech industry captures 19% of global capital invested, compared to 23% of global GDP. 

In the public markets, however, Europe is punching below its weight, only contributing 7% of Europe’s total market capitalisation. This is in stark contrast to the US, where the public market investment accounts for 33% of total regional market cap across all sectors. 

While 2022 saw a rise in European investors, US investors appear to be backing off, with a notable decline of 22% since 2021. 

Last year saw the birth of a record 105 unicorns, but 2022 could simply not measure up, with only 31 new unicorns rising in Europe. 

IPOs have faced one of the biggest casualties in the volatile public markets and negative public market sentiment. 

Only three tech IPOS with a market cap in excess of $1bn (£820m) in Europe and the US have appeared this year, in comparison to 86 during 2021. 

The knock on effects of this are huge, in terms of capital liquidity as well as the ability of existing shareholders to reinvest capital gains. 

Workers have faced the worst effects of the tech sector’s downturns, with 14,000 tech employees in European headquartered companies losing their jobs this year to date. 

This represents 7% of global tech layoffs, and this number only includes layoffs which information on reduction plans so does not necessarily represent the full scale of this year’s layoffs. 

The gender gap in Europe is also distressing – 87% of all VC funding went to men-only founding teams. Women only teams raised 1%, which is a decrease from 2018 (3%). 

Deals made by women stayed at the same percentage, however, but this just means that when women-lead teams do make a deal, they are likely to receive less actual funding than their male counterparts. 

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Despite these overall downturns and worrisome trends, the State of European Tech’s survey respondents seem, overall, positive. 

Only 23% of respondents were less optimistic about the future than last year, while 77% of all respondents were either more optimistic or held the same level of optimism as they did in 2021. 

The report also showed that there is a record level of dry powder ready to be invested, so this optimism might be realistic as investors wait for the right time to deploy their funds.

“We are living through extraordinary times. The level of uncertainty in the macro environment will transform how we use technology to tackle the challenges humanity faces,” Henrik Müller-Hansen, founder and CEO of Gelato commented on the instability affecting Europe’s tech ecosystem.

“The current environment, though challenging, is a necessary part of the innovation cycle,” Simon Bumfrey, Head of Relationship Banking, Europe, Silicon Valley Bank UK. said. “Recent experiences don’t change our view of the market or opportunity.

“For us, it’s just a question of when, not if our markets will recover.”

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