Startups across the European region are projected to raise $45 billion from VC sources in 2024, a slight drop from the revised $47 billion in 2023.

European tech funding is gradually stabilising but still remains under pressure, according to Atomico’s latest State of European Tech report. While the plunge from the revised $47 billion in 2023 to $45 billion in 2024 is less dramatic than 2023’s 50% dip, it challenges the idea that the sector had returned to “normal” growth patterns following the pandemic-era boom.

Atomico emphasises the sector’s maturation. Europe is now home to 35,000 early-stage startups, 3,400 late-stage companies, and 358 unicorns valued at over $1 billion — dramatic growth compared to 2015. Besides, valuations have improved, especially at early stages, though they remain significantly lower than in the U.S. For instance, Series C startups in Europe average $155M compared to $218M in the U.S.

At the same time, the continuing decline in VC funding hints at a changing investment narrative. The 2023 decline was initially seen as a comeback to pre-pandemic norms after an abnormal surge in digital adoption during COVID-19. However, 2024’s figures suggest that reality is more complex, as growth is still negative.

Some of the disturbing signs include exit decline, heavy debt reliance and decreased frequency of the funding rounds.

IPOs and M&A activity have plummeted. In 2024, there were just $3 billion in IPO value and $10 billion in M&A on record, a sharp drop from consistent $50 billion annual levels witnessed earlier. In fact, Atomico notes that transaction volumes are at their lowest points in a decade this year.

Debt financing now constitutes 14% of VC investments, doubling from 2023 as startups struggle to secure equity funding. The problem with debt is that not all startups might be able to pay it down eventually.

While average round sizes have increased (Series A stood at $10.6M and Series C at $55M), the frequency of rounds declined, with fewer startups raising funds within 24 months.

Artificial intelligence (AI) continues to dominate the investment landscape. In 2024, European AI startups raised $11 billion, with the U.K. leading the region in AI funding.

However, Europe significantly lags behind the U.S., where $47 billion was poured into AI companies in 2024. AI-related investments made up 33% of all funding directed toward U.S.-based, VC-backed companies in the first nine months of 2024. Large AI deals were the backbone of the American VC market amid ongoing stagnation.

Overall, confidence in the VC market is currently at its low, with 40% of founders and 26% of investors feeling less optimistic than a year ago. Investment activity is negatively affected by ongoing pressures from geopolitical and economic uncertainty.