Europe’s technology startups are thriving despite the current crisis. While startup valuations are decreasing and tech layoffs are prevalent, the atmosphere at Slush, a major annual tech event held in Helsinki until December 1st, resembled the excitement of the dotcom bubble in 1999. Over 13,000 attendees, including 5,000 entrepreneurs and 3,000 investors, gathered for two days of presentations, panels, and innovative displays.
European startups, like their counterparts worldwide, have been impacted by rising interest rates, which have diminished the appeal of their potential future profits. This year, they are projected to receive only $45 billion in investments, a 38% decrease from last year and a 55% drop from the remarkable 2021. The median valuation of more mature “growth stage” startups now falls below the five-year average. In 2021, Europe witnessed the creation of 107 “unicorns” (unlisted firms valued at $1 billion or more), followed by an additional 48 in the following year. However, in 2023, only seven new unicorns have emerged. Atomico, a London-based VC firm, reports that 50 startups have been “dehorned” this year, in addition to the 58 in 2022.
Nevertheless, when taking a long-term perspective, Europe’s startup ecosystem is surprisingly resilient. In many ways, it is weathering the crisis better than America’s more established startup scene. While investments in European startups have declined over the past two years, they are still 18% higher compared to 2020 (see chart 1), with the exception of Britain, where they have dropped by over 2%. In contrast, investments in American startups decreased by 1% during the same period. Additionally, while valuations are generally shrinking, “down rounds,” where startups accept lower valuations when raising new capital, are not as prevalent as one might expect. They account for only 21% of all…
2023-12-07 09:46:10
Post from www.economist.com
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