European tech funding halves to $45 billion, back to pre-Covid.

In 2023, venture capital investment into Europe’s tech sector fell by half as investors continued to be affected by high interest rates, according to Atomico’s data.

Despite this, artificial intelligence was a standout category with continued mega funding rounds.

It has been projected that overall European venture-backed company funding will drop 45% in 2023 from last year, according to Atomico’s “State of European Tech” report released Tuesday.

Atomico predicts that the total venture funding for European tech companies this year will reach $45 billion. By comparison, the previous year’s $100 billion was down from $82 billion in 2022.

According to Atomico, this year’s market correction reverts to the pre-pandemic years when valuations and funding levels were soaring as the tech sector secured record investments.

In contrast to its U.S., Chinese, and other international counterparts, Tom Wehmeier, Atomico’s head of data insights, said that Europe actually has increased over the past three years.

As a result of an overheated and unsustainable growth period in 2021 and early 2022, Wehmeier explained, there has been a reset. There are signs of a new reality taking hold, and green shoots are beginning to appear.”

Institutional investments from the U.S. and Asia in European tech have fallen dramatically, Wehmeier said, due to the fact that “tourist” funds such as Tiger Global and Coatue, which flooded the market in 2020 and 2021, have retreated due to macroeconomic headwinds, which have led them to get cold feet in the last year or so.