According to the annual State of European Tech report by Atomico, funds raised by Europe’s tech startups will reach nearly $45 billion for the year, down from $82 billion in 2022

Funding for European tech startups continues to drop as US investors shut off financing.

That’s according to the annual State of European Tech report by British venture capital (VC) firm Atomico. Released Tuesday, it projects funds raised by Europe’s tech startups will reach nearly $45 billion for the year, down from $82 billion in 2022.

The drop is not surprising given the dual effect of many later-stage firms postponing fundraising, as well as materially slower deployment pacing by investors, which have both served to drive the big decline in the prevalence of outsized, late-stage investment rounds — the biggest factor in the lower amounts of capital invested, the report added.

The report shows a drop in participation among American investors. For instance, the share of total capital from U.S. investors in growth-stage companies dropped from 39 per cent in 2021 to 25 per cent this year.

Atomico adds that while the drop in overall investment is considerable, it is worth noting that 2023 is still on pace to be the third-biggest year for capital invested, with funding projected to be four times higher in volume than what was seen in 2014.

In fact, the resetting of investment levels seems to reflect a correction to the long-term upwards trajectory, after two outlier years of overheated activity, Atomico added.

The report also notes that the funding decline is a global phenomenon, with firms in Europe facing the same shortage of private tech investment as their counterparts in China, the U.S. and other parts of the world.

This year has brought reports of VC firms reducing the size of their “megafunds” even in the midst of a surge in AI investment.