Investments in startups collapse again in 2023 (-39%). And Italy is no exception

Investments in startups in Europe will continue to drop throughout 2023. According to the forecasts of Atomico, the giant of investments in innovation, at the end of the year they will amount to around 51 billion, 32 less than last year (-39%) and about half compared to 2021, the year of the venture capital boom with 106 billion invested in the old continent. A contraction that alarms analysts. But in line with the collapse that has occurred worldwide in the startup investment sector.

To remain in the main markets, in the United States the investment went from 300 billion in 2021 to 153 billion expected in 2023 (-49%) and in China from 83 billion to 42 (-49%). In the rest of the world the decline is only less pronounced, going from 143 billion to 77 (46%).

Investments halved in two years. Italy follows the same trend

A halved pace. Everywhere. And that brings Europe back close to the 2020 level, just before the boom in investments in innovative companies driven by the mad rush of the technology sector during the Covid-19 pandemic. The slowdown affects everyone. And all the major world markets suffer from the same brake: that of large investment rounds. The Atomico report actually highlights a good trend of small investment rounds. Small ones.

On the other hand, there is a lack of large investments, those that have characterized the technological boom in past years. This decline also characterizes Italy. Although the report does not go into detail for all countries (Italy is not present), as far as Italian Tech is aware, in the first 5 months of the year, around 400 million were invested in startups in Italy. Last year, in the first five months, it was 850 million.

And, just as it seems to be happening in the rest of Europe, even in Italy this year the big rounds seem to be missing, such as the one that obtained Scalapay last year (497 million). While smaller investments hold up, even under 10 million, even increased in absolute terms compared to last year.

Smaller investments. The big funding rounds are missing

A trend that has strengthened this year. But that already last year gave its first signs. Many venture capitals spoke of a change in the approach to valuing startups.

Less 5-figure investments, more small investments, which are actually more solid, with a turnover, albeit small, but stable, and a more sustainable business model. An approach from which Italian startups could have benefited. Which, although often solid as a business, had not attracted huge investments.

The bigger the startup market is, the bigger the crash so far. The drop in funding was most pronounced in the UK, which recorded a 57% decrease between H1 2022 and H1 2023, compared to -55% in France and -44% in Germany. But the United Kingdom remains the European leader in venture capital, with an investment volume in the first half of the year of 7.4 billion dollars, compared to 4.6 billion dollars in France and 4.5 billion dollars in Germany.

Exits are down. In Europe, climate startups do better than AI

For Atomico, investments are falling, exits are also falling. The company’s report calculated that M&A activity in the first half of this year hasn’t reached even half the level recorded in all of 2022. And it would still be $156 billion short of total value. of releases in 2020.

Artificial Intelligence has become a theme. Even for investors. But for now it is still lagging behind in terms of attention to startups that deal with the environment. Atomic, in 2023 Generative AI companies received 35% of all AI funding in Europe (5%). But the climate theme is currently the third most attractive investment attraction in the European technology sector, after Fintech and software, with 18% of all funding (up from 15% in the first half of 2022).