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Investments in startups in Europe are down. 14,000 tech layoffs in 2022

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Investments in startups in Europe are down.  14,000 tech layoffs in 2022

A brake. Sudden, perhaps unexpected, but which concerns a bit all of Europe. Investments in startups in 2022 will record the first clear decline in the last ten years.

This is demonstrated by the data collected by Atomico, which records 85 billion invested in 2022, 15 less than what was collected by European tech companies last year. However, a drop that does not dampen the mood of investors and entrepreneurs in the sector, given that 77% of those interviewed in the report The State of European Tech: 2022 Edition say they are confident in a rapid recovery in the near future.

One year in two phases. They weigh war and inflation

Europe pays for the war in Ukraine. Galloping inflation. And an economy grappling with post-pandemic reopening. The Old Continent suffers a bit in all sectors of the economy, and that of the digital economy is no exception which, compared to the others, also pays the bill for the reopenings after the boom recorded during the lockdowns with a surge in requests for digital services. Southern Europe smiles. It’s Italy.

Between 2021 and 2022, Southern Europe added 4 new unicorns (companies with a valuation above €1 billion), an increase of 21%. Italy – according to data from Atomico – saw the birth of “its first two unicorns”: Satispay and ScalaPay.

The layoffs also affect Europe

To date, more than 14,000 employees of European-based technology companies have been laid off, accounting for 7% of global layoffs, most of which occurred in the second half of the year. Atomico does not exclude that there may be further cuts in the coming months: “There will still be suffering before a recovery,” said a manager of the fund in an interview with Italian Tech.

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But he adds that “many early-stage companies continue to grow and actively hire because there is a shortage of talent in the technology sector in Europe more generally. Europe has 166,000 startups, many of which are still hiring, and a community of 2.6 million startup employees who are more experienced, more connected and better equipped than in previous years. And it is still very difficult for founders to attract talent. For this reason, we will see a reallocation of talent between various geographies and many companies will be very willing to absorb incoming talent at the first opportunity for them”.

The tech job market collapses (even in Italy)

Comparing the job search rate for technology positions year-over-year (September 2021 to September 2022), most countries continue to see an increase in appetite for technology roles. The most marked increases are recorded in France, Sweden and Germany, while Denmark, Portugal and Italy have suffered reductions: Italy recorded a decrease of 6.3%, Portugal of 5.2%. In general, the share of tech job postings decreased relative to total job postings, indicating that job creation in the tech sector has slowed relative to the broader job market.

This trend is more marked in Italy. If in 2020, in fact, there were 44,723 job advertisements in the technology sector for 1 million job advertisements, in 2022 this number dropped to 32,999. Italy, together with Belgium and the Netherlands, stands out for the high percentage of difficult to fill roles (Hard To Fill, HTF) in the last three years. This is reflected in the sentiment shared by founders and managers who responded to the survey: 62% of Italian respondents said it is more difficult to acquire new talent today than it was 12 months ago.

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The capitalization of Italian startups

Italy, together with Spain, continues to record investment levels well below average, despite the progress made in recent years, explains Atomico. Investment activity in Italy tends to lean towards early-stage rounds, with twice the level of invested capital (as a country’s share of total invested capital) in rounds below $20 million, compared to the UK, for example .

Italy experienced the smallest drop in market capitalization and is now the eighth largest technology market capitalization country in Europe, following the IPOs of Technoprobe and Tatatu, the only two major tech IPOs in Europe this year.

The resistance of Ukrainian startups, already back to pre-war level

Tech brings a smile to Ukraine in one of the most difficult years in its history: despite the war, the Ukrainian technology industry has reflected the general resilience of Europe. In the first eight months of 2022, Ukraine’s ICT grew by 16% year-on-year, the only export sector that consistently generates foreign exchange earnings for the country. 85% of Ukrainian ICT companies have returned to pre-war indicators, and 77% of them have attracted new customers since the beginning of the war.

This year, in the midst of the conflict, one Ukrainian company managed to qualify as a unicorn: Unstoppable Domains, which builds uncensorable websites via blockchain-secured domains. This growth reflects the broader strength of Ukraine’s startup ecosystem, which, by the end of October, had attracted a whopping $241 million. In the regional context, Ukraine ranks sixth in terms of investments in start-ups.

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