European tech funding declines for third consecutive year — but the sector is finally stabilizing

Venture superior concern successful European exertion startups is projected to diminution for a 3rd consecutive year, according to VC steadfast Atomico — but determination are signs that things are yet stabilizing arsenic valuations amended and involvement rates fall.

Europe's venture-backed startups are expected to unafraid $45 cardinal of concern by the extremity of 2024 — somewhat little than the $47 cardinal they raised past year, Atomico said Tuesday successful its "State of European Tech" report.

Still, Atomico said this shows that European tech backing levels person yet "stabilized" contempt worsening planetary macroeconomic conditions starring to 3 consecutive years of declines.

The steadfast stressed that the continent's tech ecosystem is successful a overmuch amended spot than it was a decennary ago, with backing this twelvemonth inactive acceptable to eclipse the $43 cardinal startups raised betwixt 2005 and 2014.

In the play spanning 2015 to 2024, European startups person bagged $426 billion, dwarfing the sum of concern deployed into tech firms the decennary prior.

Tom Wehmeier, caput of insights astatine Atomico, told CNBC that Europe inactive has a fewer cardinal areas of betterment to code earlier it tin nutrient companies of akin standard to the largest tech firms successful the U.S. and China.

"There's frustrations astir the continued challenges faced erstwhile it comes to regulation, bureaucracy, entree to superior and this thought of scaling crossed the fragmented European marketplace," Wehmeier said successful an interview.

For example, pension funds successful Europe look barriers to investing successful task superior funds and truthful aren't gaining overmuch vulnerability to the continent's fast-growing startup ecosystem, Wehmeier said.

European pension funds allocate conscionable 0.01% of the $9 trillion worthy of assets they negociate into task superior funds based successful the continent, according to Atomico's report.

The 2024 work marks the 10th day since Atomico began compiling its yearly report, which is produced successful concern with information steadfast Dealroom.

British tech advocacy radical techUK said the reforms "should code barriers to greater availability of pension money superior and promote a imaginativeness that sees much concern into UK tech subject start-ups and scale-ups."

Reforms to pension schemes are either underway oregon being discussed successful respective different countries crossed Europe.

"These changes could effect successful billions much being made disposable to European scale-ups — and that's thing that could beryllium the quality betwixt the champion and brightest companies scaling from present successful Europe, versus being forced to relocate," Wehmeier told CNBC.

Atomico said it's optimistic astir the adjacent decennary successful European tech. The VC firm, which was established by Skype co-founder Niklas Zennström, is predicting the full European tech ecosystem combined could beryllium valued astatine $8 trillion by 2034, up from astir $3 trillion currently.

Atomico besides predicts that Europe volition mint its first-ever trillion-dollar tech institution successful a decade's time.

While Europe is location to respective alleged "decacorns" valued astatine $10 cardinal and above, including Arm, Adyen, Spotify and Revolut, it has truthful acold failed to nutrient a institution valued astatine $1 trillion.

That's dissimilar the United States, wherever respective of the alleged "Magnificent Seven" exertion companies are present worthy implicit $1 trillion. They see Google genitor institution Alphabet, Amazon, Apple, Facebook-owner Meta, Microsoft, Nvidia and Tesla.

"If we tin unlock superior astatine scale, support the brightest minds successful Europe, support that absorption connected solving truly hard problems for nine and the economy, that's however we spell and unlock the archetypal trillion-dollar company," Wehmeier said.