Atomico’s much-anticipated “State of European Tech 2024” report sheds light on the shifting dynamics of the continent’s technology sector. The report, based on insights from over 5,000 respondents, details funding trends, IPO activity, and areas ripe for growth, including AI. 

The report also includes references to Cyprus, specifically in three categories: venture funding relative to GDP, capital invested as a share of GDP by European countries over the past decade, and capital invested in 2023 compared to 2024.

European startups are expected to raise $45 billion in 2024, down slightly from $47 billion in 2023 and a dramatic drop from the record $101 billion in 2021. This represents a continuation of the post-pandemic correction seen across global markets. Despite the slowdown, Europe continues to rank as the third-largest technology hub globally, trailing the U.S. and China.

The report underscores that over 40% of the total funding in 2024 came from late-stage investments, reflecting continued interest in established players. However, early-stage funding saw a notable dip, with seed investments dropping by 15% compared to 2023.

In addition, a significant bright spot in Atomico’s findings is the prospect of an IPO resurgence. With over 100 European companies, including Revolut, Zopa, and Bolt, potentially preparing to go public, 2025 could mark a turning point for the tech IPO market.

The European IPO market hit a decade-low this year, with only 11 technology companies debuting publicly. However, investor sentiment appears to be shifting, bolstered by stabilizing interest rates and stronger corporate earnings.

In the category of venture funding relative to GDP, Cyprus ranks 6th among EU member states based on its decade-long average from 2015 to 2024. As 2024 draws to a close, capital invested accounts for approximately 0.25% of its GDP this year, reflecting a slight improvement compared to its average performance over the past decade.

When assessing capital invested as a share of GDP by European countries over the last decade (2015–2024), Cyprus also ranks 6th among EU nations with the same 0.25% of GDP. According to the report, this performance is attributed to Cyprus's favorable tax and regulatory policies, which have successfully attracted tech companies and investors.

In terms of absolute capital invested, the report’s analysis of capital invested by top 30 countries in 2023 versus 2024 places Cyprus 17th among EU countries for 2024, with approximately $100 million in funding. This reflects a notable improvement in monetary terms from its previous standing in 2023. Despite a year-on-year decline in funding levels across much of Europe, Cyprus has managed to increase its overall investment.

According to Atomico, Europe continues to grapple with a structural funding gap, particularly in growth-stage investments. Pension funds, which hold over $9 trillion in assets across the continent, allocate a mere 0.01% to venture capital, compared to significantly higher allocations in North America. This lack of institutional participation stifles the scaling potential of promising startups and widens the gap between Europe and its global counterparts, Atomico claims.

To address this, the venture capital firm calls for policy interventions to encourage institutional investment in venture capital, alongside incentives to stimulate private-sector participation.

Furthermore, Artificial intelligence remains a star performer in the European tech ecosystem, drawing a significant share of venture capital funding. European AI startups collectively raised over $7 billion in 2024. Germany led the pack, with $1.4 billion flowing into its AI sector, followed by France and the United Kingdom.

The report highlights a surge in European talent and innovation within AI, with companies focusing on generative AI, automation, and specialized solutions for healthcare and logistics. Europe’s regulatory leadership in AI, including the landmark AI Act, further positions the region as a key player in shaping the future of the industry, Atomico explains.

The report identifies several regional leaders within Europe:

• United Kingdom: Continues to lead in total funding raised, attracting nearly $12 billion, primarily from fintech and health-tech startups.

• Germany: Solidifies its position as a hub for deep-tech and AI innovation, with Berlin and Munich being focal points.

• France: Emerges as a key destination for clean-tech investments, driven by government support and private-sector interest.

• Eastern Europe: Sees a rise in startup activity, particularly in Poland and Romania, despite a lower share of total funding.

Diversity in European tech continues to make incremental progress. The report notes that startups with at least one female founder accounted for 17% of all funding rounds, a slight increase from 15% in 2023.

However, the total funding allocated to women-led companies remains disproportionately low, at just 2% of the overall venture capital raised.

Moreover, Atomico’s report highlights key challenges facing the ecosystem:

Talent Retention: The ongoing “brain drain” to North America and Asia threatens Europe’s ability to retain top tech talent.

Macroeconomic Uncertainty: Inflationary pressures and geopolitical instability, particularly due to the war in Ukraine, are dampening investor confidence.

Regulatory Fragmentation: Differences in tax policies and regulations across EU member states continue to hinder cross-border scaling for startups.

Despite the challenges, Atomico remains optimistic about the resilience and innovation in Europe’s tech ecosystem. The report highlights over 1,200 startups achieving valuations of $100 million or more in 2024, showcasing the underlying strength of the sector.