In a new report by global law firm Orrick, it was revealed that Europe is experiencing a significant shift in the tech investment landscape post-2020. Despite reaching a record $60 billion in VC investment in European startups, the region is facing challenges following the surge in investment during the pandemic.
According to the report, Europe saw a reset and major correction in investment levels globally, with only Europe exceeding 2019 levels in 2023 among the top 3 global regions for VC. However, the number of new unicorns emerging from Europe decreased, with Climate Tech surpassing FinTech as the most popular sector and AI’s share of total investment reaching a record high.
Investors are exercising greater control over investments, with founders required to stand behind warranties in 39% of venture deals. There was also a drop in later-stage financings, leading founders to explore alternative financing methods or focus on generating revenues and profits.
The report also highlighted an increase in new investors entering the tech space, as well as a rise in convertible debt and other alternative financing options. Despite a decline in FinTech investments, SaaS and AI remained popular among investors.
Overall, deal value at each stage decreased, with a significant fall in later-stage deals. The IPO landscape showed signs of life with ARM’s $55 billion IPO, and M&A activity indicated “green shoots.” In the UK, VCs are under pressure to deliver returns, leading to potential increase in secondaries and M&A activity. In France, terms are shifting towards more investor-friendly terms, while in Germany, there is a growing demand for liquidity expected to energize the tech M&A pipeline.
