A smartphone displays a Klarna logo on top of banknotes.
The European tech industry saw $400 billion in value wiped out this year and an 18% decline in venture capital funding, according to a report from venture capital firm Atomico.
The combined value of public and private tech firms in Europe fell to $2.7 trillion, down from $3.1 trillion in late 2021. The reasons for the drop were high interest rates, the war in Ukraine, and a shrinking talent pool.
Market pressures forced a number of Europe's best-known companies to raise funds at a discount to their once sky-high valuations. Swedish payments firm Klarna Bank AB raised $800 million at a valuation of $6.7 billion, a decline of 85% from its 2021 price tag of $46 billion.
Tom Wehmeier, partner at Atomico, told Reuters that the European tech ecosystem is facing the most challenging macroeconomic environment since the global financial crisis.
Venture capital funding in Europe was down to $85 billion for the year, according to data collected across 41 countries, an 18% decline from the $100 billion raised in 2021.
The number of new unicorns -- firms valued at $1 billion or more -- fell this year, from 105 to just 31 in 2022.
Despite these challenges, Atomico found industry insiders enthusiastic. In a survey of founders and investors in the continent, 77% said they were either as enthusiastic or more so about the future of the European tech industry than in 2021.
Wehmier added that this is a new reality. The financial markets have changed and the expectations of everyone working within the European tech industry need to change.