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The European technology industry lost more than $400 billion of capitalization this year.

Published: 2022-12-08

The total value of all public and private European companies in the technology sector since the beginning of the year has decreased from $ 3.1 trillion to $ 2.7 trillion, losing $ 400 billion, according to the annual report of the venture capital company Atomico "The State of European Technology".

This is another illustration of the plight in which the global technology sector found itself - it began to shrink under the influence of severe negative geopolitical and macroeconomic factors. Central banks are raising rates and canceling financial stimulus introduced during the pandemic, and investors are reconsidering their positions on technology players, the value of which is usually valued taking into account expected cash flows.

Many European companies have drastically lost a significant part of their market value. The Swedish Klarna, which offers the purchase of goods in installments, has fallen in price by 85% since the beginning of the year - from $45.6 billion to $6.7 billion. Swedish streaming Spotify has lost more than 60%. Atomico, which has collected data from 41 countries, estimates that venture capital funding for European startups could hit $85 billion in 2022, down 18% from last year. However, this decline was also the second-largest amount invested in the European tech ecosystem: last year was a record year due to record levels of US investor participation. This year, the trend has lost its relevance, and the number of US "megarounds" involving $100 million or more has fallen by 22% compared to last year.

The negative European trend emerged only in the second half of the year, specified in Atomico - the first half of the year showed the level of investment by 4% higher than in the same period last year. Financial flows began to decline from July, and in August and September this trend worsened. Since then, monthly investment volumes in the region have ranged from $3 billion to $5 billion, thus falling back to 2018 levels. The pace of emergence of “unicorns” has also slowed down: if in 2021 there were 105 startups with a valuation above $1 billion, then in 2022 there were only 31 of them. over $1 billion, two of which were in Europe. In 2021, there were 86 such IPOs. Finally, European technology companies have not escaped the global trend for massive layoffs – more than 14,000 people, or 7% of the total number of layoffs in the world, have lost their jobs this year.

In a positive light, experts assess the prospects of only some technological areas: artificial intelligence, cybersecurity and environmental solutions. The picture for 2022 looks bleak overall, but investment to this day is eight times what it was in 2015.