The impact of the pandemic and the chip shortage
The European tech industry saw $400 billion in value wiped out this year and an 18 per cent decline in venture capital funding, according to a report from venture capital firm Atomico. The combined value of public and private tech firms in Europe fell to $2.7 trillion, down from $3.1 trillion in late 2021.
The report attributed the decline to the impact of the COVID-19 pandemic and the global chip shortage, which have disrupted the supply chains and the demand for many tech products and services. The report also noted that the European tech sector is more exposed to the cyclical fluctuations of the economy than the US or China, where tech giants dominate the market.
The report warned that the funding crunch could hamper the growth and innovation of European tech startups, especially in the fields of artificial intelligence, cloud computing, and biotechnology. These sectors require large amounts of capital and talent to scale up and compete globally.
The role of the European Union and the national governments
The report urged the European Union and the national governments to support the European tech industry with more funding and policy initiatives. It highlighted the importance of the EU’s Chips Act, which was passed in April and allocated 43 billion euros for boosting the semiconductor production and research in Europe.
The report also praised the European Innovation Council (EIC), which has been providing grants and equity investments to tech startups that are developing future technologies that will contribute to the EU’s strategic objectives. The EIC has announced that it will grant 1.13 billion euros to tech startups in 2023, and has already selected 32 companies to receive funding in the first quarter of the year.
The report also called for more collaboration and coordination among the European tech hubs, such as London, Berlin, Paris, and Stockholm, to create a more integrated and diverse ecosystem. It also suggested that the European tech industry should leverage its strengths in social and environmental impact, digital sovereignty, and diversity and inclusion, to differentiate itself from the US and China.
The outlook and the opportunities for the European tech startups
Despite the challenges and the uncertainties, the report also highlighted some positive trends and opportunities for the European tech startups. It noted that the European tech sector has shown resilience and adaptability during the crisis, and has continued to produce successful exits and IPOs. It also pointed out that the European tech startups have attracted more interest and funding from the US and Asian investors, who are looking for new markets and innovations.
The report also identified some emerging sectors and themes that could offer new growth potential for the European tech startups, such as the metaverse, the creator economy, the circular economy, and the healthtech. It also emphasized the importance of fostering a culture of experimentation and risk-taking, as well as attracting and retaining more talent and diversity, to enable the European tech startups to thrive in the post-pandemic world.
