The ninth annual Atomico State of European Tech report revealed a significant decline in investment in the European tech ecosystem for 2023.
Reaching approximately $45bn, this marks a substantial 55% decrease on the record-breaking year of 2021. In light of this, Claire Trachet, CEO/Founder of business advisory firm, Trachet, discusses the significance of this decline as well as the continuing trend of companies choosing the US over the UK for their IPOs.
This decline can be attributed to shifts in the broader macroeconomic landscape, resulting in later-stage companies delaying fundraising runs and investors deploying capital at a slower pace.
This is somewhat in contrast to elsewhere in Europe, which remains the only region experiencing growth in investments, with an 18% increase since 2020. Estonia for example, emerged as a standout performer, consistently leading in the density of billion-dollar companies per million inhabitants.
Concerns regarding the UK’s IPO market continue, as yet another large initial public offering fell into the hands of the US. Aspen Insurance has opted for the NYSE for their $4bn IPO amidst concerns surrounding UK valuations and stringent listing requirements, marking a significant blow for a market that’s struggling to recover.
The IPO, planned for the first half of 2024, is advised by firms such as Apollo, Goldman Sachs, Citi, and Jefferies, reflecting a broader trend of companies finding more favorable conditions in American markets.
Claire Trachet stresses the need for support among UK tech startups and the sector as a whole. Although the UK has great potential as a tech power – being recently named one of the top three countries in the world for tech investment, fundamental support is still necessary for its growth.
To strengthen the growth of tech startups on their journeys to IPO, action needs to be taken with a specific focus on certain areas. This requires government support and investment to be poured into supporting startups to reach their potential.
Claire Trachet, tech expert and CEO and founder of Trachet, said, “The UK tech sector has such great potential; it was only recently named one of the top three countries in the world for tech investment.
“This, combined with the projections we have seen for the next ten years, tells us that the sector has a promising future, however, fundamental support for the sector is still essential. There needs to be action taken with a specific focus on certain areas to strengthen the growth of tech startups on their journeys to IPO.
“As the tech industry model evolves, tech startups and scaleups will also have to follow suit, but not all businesses will be able to quickly adapt to today’s economic environment. As a result, we risk losing startups with great potential to keep the UK as a top contender for foreign investment. This is where investment needs to be prioritised, we need to see government support and investments being poured into supporting startups reach their potential.
“As concerns loom over the UK’s IPO market, exemplified by Aspen Insurance’s decision to opt for the NYSE for their $4 billion IPO. It’s crucial to acknowledge that businesses still consider listing on the LSE, however, the city is likely to grapple with a subdued IPO market until investor confidence and interest are rekindled.”