UK Tech Leading in VC Funding, but Losing Ground to Europe

UK tech businesses are projected to secure $12.7 billion in venture capital in 2023, making it the highest in Europe. However, this represents a 54% decrease from the $27.9 billion secured in the previous year, according to data, published in Atomico’s ‘The State of European Tech 2023’ report.

Overall, European tech startups are expected to secure $45 billion in VC funding in 2023, a significant decrease from the $82 billion raised collectively in 2022, which France raised the second-highest amount of VC funding at $8 billion, followed by Germany at $7.8 billion.

The UK has experienced a steeper decline in VC funding compared to the European average, with a 54% year-on-year decrease. The UK has lost the largest share of VC funding among European countries over the last three years. Despite the decline in VC funding, the UK continues to lead in startup creation, accounting for half of all new firms launched across Europe in 2023.

The report suggests that macroeconomic challenges, including rising interest rates and economic headwinds, have contributed to a decline in investor confidence and a retreat of US investors in Europe.

Despite the overall decline in VC funding, the field of artificial intelligence (AI) experienced growth. Eleven AI-focused businesses across Europe raised mega-rounds of $100 million or more. AI startups also accounted for 11% of seed-stage rounds.

The year saw fewer new unicorns (companies valued at $1 billion or more). The UK had companies like Synthesia and Quantexa achieving unicorn status.

The report highlights that Europe is leading in purpose-driven tech investment, with a focus on sustainability and climate, which has seen an increasing share of funding over the past decade.

There is a call to build an investor landscape in Europe that matches the ambitions of founders. The report notes that companies are still 40% more likely to be funded in the US compared to Europe.

In summary, while the UK remains a leader in startup creation, it has experienced a significant drop in VC funding, and the report emphasises the need for Europe to build a more ambitious and supportive investor ecosystem.

(Source: UKTN / Atomico)

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