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CHRIS GREW
Partner
Orrick London
Julia Apostle
Partner
Orrick Paris
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READ THE 2021 REPORT
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A Word from Orrick
If one word summarizes European tech in 2022, it is resilient. Total investment remains on track to reach
$85 billion. In the toughest macroeconomic environment since the global financial crisis, this year is on pace to fall just short of 2021’s record-breaking levels. While fundraising has become more challenging, founders should keep these six things in mind as they navigate an uncertain future:
33%
of VCs said they were placing even more emphasis on social and environmental impact since the beginning of 2022
1
Responsible Growth Will Drive Innovation
As an economic downturn creates turbulence across global markets, venture capital investors are becoming more cautious and selective. Growth for growth’s sake is no longer enough – companies also must balance efficiency, sustainability and profitability.
Nearly 3,500 institutions participated in at least one investment in Europe in 2022. Despite some slowdown in investment activity, plenty of investors continue to explore opportunities in European tech.
The Pool of European Investors Is Deeper Than Ever Before
2
The pandemic accelerated tech adoption, but potential still beckons around the continent. A third of retail companies in Europe lack a website and nearly 60% of businesses with at least 10 employees are not in the cloud.
The Market Offers a Wealth of Untapped
Potential
3
Tech spending has more than doubled during the
last 20 years. It transforms how we live and work
and promises to continue reshaping everything from energy and sustainability to defense, cybersecurity, AI safety and more.
Tech Continues To Drive Change
4
The transition to net-zero greenhouse gas emissions by 2050 will require an extra $3.5 trillion a year in spending, according to McKinsey, and a significant portion of that will come from venture. The tech community is uniquely positioned to help balance Europe’s need for energy with its leadership in combating climate change through purpose-driven investments and clean energy transition.
Venture Capital Will Help Fuel the
Net-Zero Transition
5
Policymakers continue to look to tech to solve complex problems. Regulators have pivoted as innovation outpaces regulation. From the European Commission’s “Digital Decade” targets for
2030 to the Digital Markets Act, regulators are trying to create an open and fair digital economy. They will need to balance privacy with innovation. Meanwhile, the public sector makes substantial commitments to venture capital. Government investment in financing – as LPs into VC funds and through non-dilutive financing to startups – will help address the resource distribution imbalance of capital to early-stage companies.
Government Will Play a Critical Role
6
The tech community faces complex challenges that require creative solutions. The State of European Tech can help address those challenges. The report has become the most widely anticipated guide to VC and tech in Europe. We at Orrick are honored to contribute and partner with Atomico.
Chris Grew
Partner, Technology Companies Group, Orrick
3,500
institutions participated
in at least one investment
in Europe in 2022
Nearly
We’re in a period of market uncertainty – and the data clearly suggests that founders will do well to focus on efficiency, sustainability and profitability over unbridled growth. That said, the investor pool is deeper than ever before and the role of tech in the European economy is far different than the last downturn. Indeed, it’s central to solving the climate crisis and other challenges facing us as a society.
Companies should not stop thinking about compliance, especially in the context of all the new EU tech regulation coming down in the pipeline over the next few years.
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2022 has certainly been a year of change, both in terms of the pace and size of financing rounds. Fundamentally, tech companies should be most focused on profitability and developing meaningful solutions. Diversity & Inclusion and Doing Good for the Planet will continue to have access to increased funding and should therefore suffer less from the temporary slowdown of the economy. We remain very positive on the year to come, particularly as Europe is well advanced in these areas.
Raphael Crouan
Managing Director Orrick Tech Clients Europe
We’re in a period of market uncertainty – and the data clearly suggests that founders will do well to focus on efficiency, sustainability and profitability over unbridled growth. That said, the investor pool is deeper than ever before and the role of tech in the European economy is far different than the last downturn. Indeed, it’s central to solving the climate crisis and other challenges facing us as a society.
Raphael Crouan
Managing Director
Orrick Tech Clients Europe
There has clearly been a change. The best ideas will still attract very favorable terms and financing. But there will be more scrutiny and more diligence. That’s a good thing for the ecosystem.
There has clearly been a change. The best ideas will still attract very favorable terms and financing. But there will be more scrutiny and more diligence. That’s a good thing for the ecosystem.
Shawn Atkinson
Partner
Orrick London
Orrick partners share their insights on what lies ahead for the European tech and venture ecosystem.
What's Next for European Tech?
Orrick partners share their insights on what lies ahead for the European tech and venture ecosystem.
What's Next for European Tech?