In the first quarter of 2023 funding venture funds to European startups. The ecosystem accepted a total of 10.6 billion funds in the first three months of the year, down 66% from a year earlier and 18% down from the last quarter of 2022. Lower capital inflows for startups to go global in the first quarter of 2023, after international funding followed the downturn. Especially in the case of European startups, the retreat is largely due to the reluctance of US investors to invest with high risk. This is a sign that the ecosystem continues to be affected by high interest rates and broader economic uncertainty.

“Europe is still adjusting to a new funding model that should become less and less dependent on foreign capital,” Crunchbase said in a report cited by per annum. “The effects of global macroeconomic changes are also being felt in Europe, creating an environment of serious challenges for both startups and investors,” comments another Pitchbook report. The effect of these changes is reflected not only in the reduction in the cost and quantity of funding. This is also evident in the sectors that investors are now choosing to direct their funds.

For example, venture capital funding in previously popular industries such as fintech and IT is now on the decline. On the contrary, new industries, such as energy, are now considered very “promising” and attract investment interest. In terms of financing, there is a real reduction in funding for start-up companies that are in the late stages of development. In fact, late-stage startups raised just $4.3 billion, a 77% drop in funding compared to the first quarter of 2022. The decline in funding for late-stage startups is due to events on the inflation front and their impact on company valuations.

The decline in European early-stage startup funding was more moderate, reaching a percentage of 25%, while the number of funding rounds fell by 28% over the same period. This is a clear signal that VCs are currently unwilling to make long-term commitments and prefer to continue supporting companies they have recently invested in. This confirms the fact that early-stage startups suffered the least losses, with a modest 7% reduction in capital compared to a year earlier.