The state of European startup funding | SearchVentures 01/11

SearchVentures delivers data-driven insights on the European startup market every week directly to your inbox.

This week, we focus on a decline in European startup investment for 2023 while also noting that some sectors are defying this trend.

Here's what we have this week:

• European startup investments visualized 📊

• What are the funding risks of startups? ⚖️

• Behind the scenes at SearchVentures 📚

• The fastest growing startup sectors 📈

The latest in the European startup market

This year's total startup funding is estimated at $51 billion for the end of the year, it is a critical year for startups, yet investors seem to be more stringent with funding.

2023 Market Overview

• Total Startup Investments: $51 billion, a 38% decrease from 2022.

• Investment Focus: Late-stage startups are attracting more capital

• Emerging Sectors: Renewable energy and health tech gaining momentum

• Investor Behaviour: Increased focus on capital efficiency

This data shows a pivotal moment for the European startup market as total funding declines from the prior investment levels of both 2021 & 2022.

The contraction in total startup funding across Europe can be primarily attributed to rising interest rates and economic volatility.

Key Takeaways

• Reduced investment: 2023 sees a notable decrease in investment compared to the peak of previous years.

• Economic Volatility: Rising interest rates and economic volatility contribute to investor caution.

• Strategic Shift: Investors are focused on capital efficiency.

⚖️ European Startup Funding Success

The data showcases the percentage of startups that progress to the next stage of funding, as well as the likelihood of an exit in the European market.

Based on over 5,417 European startups in the seed stage, only 14% of the companies raised Series A and a further 9% had an early company exit/sale.

The results indicate the significant risk to reward of early-stage VC investments.

Key Takeaways

• Seed Progress: Of 5,417 startups, 14% (756) reached Series A.

• Declining Succession: Numbers drop sharply through funding stages; only 100 raised Series C.

• Higher Exits: More startups exit early stages than progress

Behind the scenes at SearchVentures

At SearchVentures, we make sense of the fragmented European startup market with data. We study reports and talk to experts to give you accurate and data-driven insights that provide clarity.

📈 European Startup Sector Growth

Despite a decrease in overall startup investments the energy and AI-led health sectors have experienced relative growth driven by EU government initiatives and funding incentives.

Key Takeaways

• Fintech lead by UK: €5 billion in funding, concentrated in London, although recently facing a 70% investment dip.

• Health AI: €7 billion in funding, boosted by EU-backed AI initiatives.

• Transportation: €8 billion in funding, positively impacted by Berlin's state-supported growth.

• Energy Independence: €12 billion in funding, aligned with European green energy policies.

Summary

The European startup data highlights a shift in investor focus towards late-stage startups and sectors like renewable energy and health tech, fueled by EU initiatives.

Overall startup funding is down, making these areas potentially more stable and promising for both startup founders and investors.

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See you next week

Cheers,

Odin Lund & Hariprasad Mohandas