UK TECHNOLOGY companies raised $7.4bn (£5.9bn) during the first half of 2023 in the sharpest funding decline across Europe, according to a new report.
Data shows that UK tech investment fell by 57% year-over-year, while France decreased by 55% and Germany by 44%, according to analysis from investment firm Atomico.
The research showed that last year UK tech companies raised the most across Europe in 2022, securing $17.3bn in the first half of the year. This also meant that the UK had the most ground to lose.
Tech funding for French companies fell from $10.1bn to $4.6bn over the period, while German tech companies dropped from $8.1bn to $4.5bn.
Rising interest rates, surging inflation and macroeconomic uncertainty stemming from Russia’s invasion of Ukraine have significantly slowed down investment levels from record levels in 2021.
Meanwhile one in five global venture rounds during the first quarter of 2023 were downrounds, the Atomico report found – nearly four times higher than the same period in 2022.
Responding to the report, Steven Mooney, Founder and CEO of FundMyPitch said: “Getting access to funding is critical to enable ambitious businesses to hire fresh talent, expand, develop their product offering and grow. Entrepreneurs are already feeling the heat from stubborn interest rates and the cost-of-living crisis, all of which ultimately hits UK GDP. With forecasts suggesting a decrease in technology investment, the time has come to look again at how we support the next generation of business owners to achieve their full potential.
“Far too many new companies aren’t being taken seriously by the big investment houses and we need to create a level playing field where those with bright ideas get the support they need to thrive,” said Mooney.
Tech expert James Campanini, CEO, VeUP said: “Falling investment will put huge pressure on the next generation of technology entrepreneurs, forcing many businesses to cut costs and do more with less. Against the backdrop of sluggish economic growth, getting a grip on IT spending and infrastructure efficiency should be a top priority for companies looking to grow. Far too many businesses have moved to the cloud but have failed to optimise costs and get the most out of the benefits on offer, which ultimately hits the bottom line.
“Having a clear strategy in place to drive growth through the strategic IT investment should be a top priority for companies looking to move forward,” concluded Campanini.
“We should think about this period as a return to first principles,” said Tom Wehmeier, partner and head of insights at Atomico. “2021 was a clear outlier, with investment volumes and valuations now returning to long-term averages.” The report added that the “new market reality” first identified in the second half of 2022 is “here to stay”.
Global tech exits – through both IPOs and M&A – remain stagnant, with $21bn in value so far this year compared to a peak of $177bn in 2020 and $166bn in 2021.
In the UK, it is a continuation of a downward trend for tech IPOs, with volumes falling to their lowest level last year in a decade.
Generative AI – the latest technology buzzword – accounts for 35% of all artificial intelligence and machine learning funding so far this year, the highest share ever.