The losses of the European technology industry in terms of market value amounted to more than $ 400 billion during 2022.
According to Arabiya.net, Atomico, the venture capital firm, indicated in its annual report that the total value of all public and private European technology companies has declined to $2.7 trillion from its peak of $3.1 trillion in late 2021.
The figures confirm that 2022 has been a difficult year for the technology sector, driven by pressures from global factors, including Russia's invasion of Ukraine and tightening monetary policy.
This comes after the policies of the US Federal Reserve and tightening central banks prompted investors to re-evaluate their positions in loss-making technology companies, whose values usually depend on anticipating future cash flows.
Partner at Atomico, Tom Wimmer, said: It's been a tough year - war in Ukraine, inflation, rising interest rates and geopolitical tensions across the continent. It is the most challenging macroeconomic environment since the global financial crisis.
In Europe, some companies experienced a sharp decline in their market values. The buy-now-pay-later company Klarna cut its valuation by 85% from $45.6 billion to $6.7 billion in a so-called downward spiral. Meanwhile, shares of Spotify music streaming service are down more than 60% from last year.
The sector has attracted investors
Total venture capital funding for European startups is expected to drop to $85 billion this year, according to the Atomico report, which is based on quantitative data and surveys in 41 countries. This represents an 18% decrease from the more than $100 billion in funding raised by European startups in 2021.
Despite this, Atomico noted that this is the second largest amount ever invested in the European tech start-up ecosystem so far, after the sector strongly attracted US investors last year.
This year saw a reversal of that trend, with foreign investors largely backing out. The number of active US investors in mega rounds of $100 million or more is down 22% from last year.
The slowdown began in the second half
In the first half of 2022, Atomico said, the technology sector in Europe was on fire, with investment levels still 4% higher than in the same period in 2021.
However, investment started to slow down from July and slowed further during August and September. Since then, average monthly investment levels have ranged between $3 billion and $5 billion, in line with 2018 levels.
The number of unicorns — startups worth more than $1 billion — fell in 2022 to 31 from 105 last year, according to CNBC.
Meanwhile, public offerings have evaporated. Only 3 technology IPOs with a market value of $1 billion or more were executed globally in 2022, with 2 taking place in Europe, compared to 86 IPOs in 2021.
The region has not been immune to the wave of tech layoffs. According to the report, European-based companies laid off more than 14,000 employees this year, accounting for 7% of all layoffs globally.
