The technology sector is facing a downturn due to multiple factors such as inflation, higher interest rates, and geopolitical events. This has particularly impacted venture capital (VC) funding for startups outside the U.S, with European firms expected to raise only $42 billion this year, down from $85 billion in 2022. Later stage and larger companies have been hit the hardest, with only 7 unicorns set to emerge this year compared to 108 in 2021. However, despite the overall decrease in investment, there are some positive signs. The total value of the European tech ecosystem has rebounded after a drop in 2022, and the majority of follow-on capital deployed has been through flat rounds or up rounds. Atomico’s report also highlights the decline in crossover investors and the slowdown in nine-figure rounds. Startups at every stage are raising funds at lower valuations, particularly at later stages. The median valuation for European startups remains considerably lower than their U.S. counterparts. Interestingly, climate tech and the wider area of carbon and energy accounted for 27% of all capital invested in European tech in 2023, overtaking finance & insurance and software as the single largest sector by capital raised. Overall, the report suggests that while there has been a decrease in funding compared to the last two years, the figures are following a slower and possibly healthier growth curve.

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