Venture Capital/Analysis/ European tech in 2022: The year in data A look back at the year in nine charts By Tom Nugent 29 December 2022 \Venture Capital Hoxton Ventures to add a new partner in April By Amy Lewin 17 February 2023 Venture Capital/Analysis/ European tech in 2022: The year in data A look back at the year in nine charts By Tom Nugent 29 December 2022 2022 was a reality check for European tech. After VC funding went through the roof in 2021, worsening economic and business conditions took their toll in the second half of 2022. The year went from being defined by free-flowing cash to the stark reality of layoffs, cost-cutting and a tough fundraising climate for founders. But after such a rollercoaster year, how do you begin to tell the story of the last 12 months? Through data, of course. Here’s a look back at 2022 in nine charts. Funding plummeted Funding in the first quarter of the year showed signs of keeping pace with the levels seen in 2021. But that started to change in Q2 as the war in Ukraine, rising inflation and higher interest rates began to impact European tech. The total raised by European startups in 2022 ($94bn as of December 19) is still a good $40bn more than any other year before 2021. But while the total funding figure was propped up by big rounds at later stages earlier in the year, it plummeted through Q3 and Q4 — according to Dealroom data, there have been no $250m+ deals in Q4 in Europe. Deal count (typically a better proxy of the overall funding landscape than total raised) is also sharply down. 2022’s overall deal count of 9,400 (as of December 19) is the lowest yearly count since 2015. Quarterly data is worse — so far in Q4 2022 there have been 1,600 deals, the lowest quarterly figure since Q3 2014 when it was 1,500. It is worth saying that this data could change as more rounds are reported and data is updated — private market data is typically not the most reliable or transparent — but that likely won’t change the overall trend. 2022 was the year of the layoff More than 150k tech workers have been laid off globally in 2022, according to layoffs tracker layoffs.fyi. In Europe, the trend has accelerated in the last six months. UK-based fintech Uncapped was the first company that Sifted logged in our layoffs tracker earlier this year when it let go of 26% of its staff — 29 employees — in May. Since then, there have been widespread cuts across sectors. Speedy grocery company Gorillas let go of half its staff at its Berlin HQ, also in May; BNPL giant Klarna made several rounds of layoffs, first cutting 10% of staff in May before making a second round of redundancies in September; and, more recently, fellow fintech Wayflyer laid off 40% of its staff in November. German vertical farming company, Infarm, reduced its headcount by 50% in November. Early-stage founders not as hard-hit as their later-stage counterparts The downturn might not have hit early-stage founders as hard as their later-stage counterparts, according to a recent survey by seed-focused VC January Ventures. The VC surveyed 442 startups — 137 in Europe — and found that early-stage companies hadn’t cut staff or spending in the same way later-stage or Big Tech companies had. That’s despite the majority of them having less than 12 months of runway. Only 7% of pre-seed and seed-stage European startups have reduced their headcount. That might change as we head into 2023 though, with the funding landscape generally tough at all stages. If founders find themselves in need of cash in 2023, it may be headcount that’s reduced before they go out on the fundraising trail. 42% of European founders said investors were slowing down the pace of their investments, and 38% said VCs were typically now turning to people they knew when it came to deploying capital — potentially leaving underrepresented founders out in the cold. France and Italy had years to be proud of As expected, the UK, France and Germany led the charts as the top three countries in Europe for funding. It’s France that arguably has the most to shout about though — when it raised $5.7bn in Q1 of this year it was the first time it beat Germany into second place since Q1 2020, and it’s stayed there ever since. Elsewhere in Europe, Italy had a year to remember. It bagged its first two unicorns this year in Scalapay and Satispay and is set to finish the year with overall funding at $1.6bn, compared to $1bn last year. Along with France and Belgium, it’s one of the few countries in Europe to see a year-on-year funding increase in 2022. Fintech was Europe’s best-funded sector European fintechs had another stellar funding year — though the $22.2bn raised so far this year is lower than 2021’s $28.1bn, it’s still $10bn more than the next best-funded sector, energy. Energy startups have also had another strong year for funding. Total funding nearly tripled when compared to 2020’s figure — startups in the sector have raised $12.1bn so far in 2022, compared to 2020’s $4.1bn. The sector has also received more funding than it did in 2021 ($11.2bn). Diversity was still awful 2022 was yet another year where the spotlight was shone on European tech’s diversity problem. In May, Sifted reported that two-thirds of the UK’s unicorns had a gender pay gap worse than the national average. The UK’s startups overall have a pay gap that’s more than double the national average — and Germany and France don’t perform much better. The data doesn’t improve when it comes to VC funding. Atomico’s State of European Tech report showed that a paltry 0.7% of total funding into European unicorns goes to founding teams made up entirely of minority ethnic entrepreneurs — only 1.4% of European unicorns are set up by founders from that demographic too. It also showed that just 1% of VC funding in Europe went to women-only founding teams in 2022 — down from 3% in 2018 — and a woeful 1% of capital was raised by funds with women-only GPs. Only 15% of general partners in Europe are women. European tech companies also have a dire record when it comes to women sitting in the C-suite, with only one in seven executives being women. Tech job listings dropped The talent market was tipped upside down this year, as even the most well-capitalised companies in Europe laid off large numbers of staff from April onwards. Data from tech jobs platform Otta shows that the number of live job listings on its platform increased throughout 2021 — in line with companies scoring record funding rounds and rushing to expand their headcount. The opposite was true for 2022. The year started out strong with a peak in January of 3,670 job listings advertised, according to Otta data. Numbers then began to decline, with a noticeable drop between May and June — perhaps at the point when the effects of the downturn really started to kick in for startups. This year ended up with the lowest jobs advertised since January 2021. What will 2023 hold for the tech jobs market? None of the year’s biggest rounds was raised after July Unsurprisingly, none of the year’s biggest rounds was raised after July, as the downturn took hold. According to Dealroom data, there have only been 12 deals of more than $250m in the second half of this year, and none in Q4 so far — it’s the worst half-year for $250m+ deals since the second half of 2020, when there were 10. Swedish battery startup Northvolt clocked 2022’s biggest raise when it brought in $1.1bn in July. Checkout.com’s $1bn January raise was the second biggest of the year — the Series D gave the fintech a valuation of $40bn, making it Europe’s most valuable startup at the time. The company has since downgraded its valuation internally to $11bn. Among the other huge rounds this year were Klarna’s $800m raise in July, a round that saw the startup’s valuation drop from $45bn to $6.7bn — what’s known as a downround. Speedy grocery delivery company Getir — which finalised a deal to acquire rival Gorillas in early December — raised $768m in March; carbon removal startup Climeworks bagged $650m in April; and Finnish unicorn RELEX brought in €500m in February. Fewer unicorns were created Europe had a belting year for unicorns in 2021 — it was always going to be a hard act to follow. But 2022 still saw 47 companies cross the $1bn valuation mark for the first time, according to Sifted analysis. There was also cause for celebration for the VCs who got in early and backed the companies that hit $1bn+ valuations this year. But who had the sharpest eye? Among them were Chinese tech giant Tencent — which backed four unicorns in Europe this year, the same number as France’s Eurazeo. Just pipping those two were Index Ventures, which backed five — among them Euan Blair’s edtech unicorn Multiverse — and Coatue, the US-based fund that saw six European portfolio companies pass the $1bn valuation mark in 2022. Coming out on top though was another US-based investor, Tiger Global, which had a total of eight portfolio companies hit unicorn status this year. Tom Nugent is Sifted’s digital editor. He tweets from @TJNugent92. 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