Stingy investors, tumbling company values, thousands of layoffs: these are difficult times. But Germany is doing reasonably well, says a recent study.
The European start-up scene remains under pressure even after the crisis year 2022. Investments in tech companies are expected to reach $51 billion this year, estimates there Risk capital provider Atomico. That would be less than half than in the boom year 2021 with around 100 billion dollars in venture capital and even less than in 2022 (77.4 billion euros). The German tech industry got off relatively lightly. According to the analysis, the new reality of the market will continue.
“2021 was a clear outlier and investment volumes and valuations are now returning to long-term averages,” says Atomico partner Tom Wehmeier. “Devaluations will continue and more layoffs could follow.” Investments remain at the current level, but cut 2023 a third above the value of 2020, according to the venture capitalist, who also invests in German startups Lilium and Infarm has.
Startup Germany is in a comparatively good position
In Europe, Germany is doing better than Great Britain and France with a decline of 44 percent in the first half of 2023: There, the funds that start-ups urgently need for their growth shrank by 59 and 55 percent respectively within a year.
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After a boom year in 2021, when the tech industry benefited from a digitization push during the pandemic and risk-taking investors, the market had completely turned around in 2022. In view of the Ukraine war, the weak economy and the sharp rise in interest rates, investors were reluctant to inject money. Valuations of large startups plummeted. Many companies cut jobs. According to Atomico, there were still 185,000 layoffs in the tech industry worldwide in the first quarter of 2023, more than in the whole of 2022 with 165,000.
Adverse conditions continued this year, according to the Atomico study. While there are hardly any IPOs by tech companies due to the uncertainty, company valuations have already fallen in a fifth of the financing rounds at the beginning of the year. At the same time, there are fewer start-ups, and experienced founders are increasingly daring to enter the market. However, there is hope for stabilization towards the end of the year with more IPOs.
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