The COVID-19 pandemic has hit the tech sector hard, but there is a silver lining for startups that survive the slowdown. According to a new study from Startup Genome and the Global Entrepreneurship Network (GEN), VC funding across the world decreased by 35% in 2022 from the previous year, while deal counts, exits, and unicorns also saw a decline. However, recessions have historically been good times to invest in startups, and startups funded during the Great Recession saw higher exit multiples than those funded during economic expansions.
The report also notes that high-interest rates can benefit startups by concentrating capital and talent into ventures that create value. In 2022, while fewer startups were funded, they received larger sums, and investments in artificial intelligence and big data increased. Europe demonstrated particular resilience, with 2022 the second-biggest year overall for European VC activity after 2021, and deal count and amount surpassing pre-2021 numbers. Europe’s share of unicorns also increased from 14% to 20%.
The report found that of the seven ecosystems producing their first tech unicorn in 2022, three were in Europe – the Sofia-based Payhawk, Zagreb’s Rimac, and Rohlik Group in Prague. Europe also represented the most significant region in the GSER’s Emerging Ecosystems, which contains startup communities at earlier stages of growth, with the continent expanding its share from 37% to 41% since last year and winning the top spot with Copenhagen.
Overall, London remains the leading ecosystem in Europe, with the most companies valued at over $1 billion, followed by Berlin and Amsterdam. Zurich is an ecosystem worth noting; despite starting at 36th place in 2022, it rose ten places in 2023 in world rankings. The city’s exits over $50 million grew by 300%, and its unicorn count surged from two to six, highlighting that startups can still thrive through an economic downturn.
The report foreshadows where the world’s most disruptive and solution-driven companies may emerge in the future, providing unparalleled insights that policymakers and community leaders need to build resilient startup ecosystems. Although the tech sector is experiencing an unprecedented slowdown, entrepreneurs, policymakers, and community leaders everywhere remain confident that, equipped with the right knowledge, they can leverage opportunities to come together and show how innovative technologies can not only drive growth and job creation, but simultaneously save the planet and ensure a better future for everyone.
