Europe’s Startups Stretched as VC Funding Falls 61% in First Half of ’23

European startups are reportedly rethinking expansion amid a venture funding drought.

As the Wall Street Journal reported Tuesday (Aug. 22), the struggle to find financing has become the norm for these companies as investors seek safer investments such as bonds.

The report, citing data from Pitchbook, says that the amount of venture capital funds invested in Europe fell by 61% in the first half of 2023, a steeper decline than what American startups have had to deal with.

Consequently, the European Union’s development bank and five EU countries are working to close the funding deficit, pledged 3.75 billion euros ($4.1 billion) to support Europe’s tech sector, the report said.

The WSJ noted that the funding drought has forced startups to cut costs and scale back their plans for growth. Glovo, a food delivery company in Spain, laid off 7% of its workforce earlier this year. Tuesday also brought the news that another delivery startup, Turkey’s Getir, was letting go of 2,500 people or nearly 11% of its staff.

Others have found themselves doing more to get less, the report said, like Daan Weddepohl of the Dutch startup Peerby, which lets people rent goods for their neighbors. He told the WSJ he raised just a third of the funding he had hoped for to expand the company to the U.S.

“It took a lot more work, a lot more time, was a lot more painful, and I had to go to a lot more conferences to meet people,” Weddepohl said.

Because of this tough environment, PYMNTS wrote earlier this week, alternative methods like angel investing, government funds, and corporate partnerships have become more popular and are being used to complement traditional funding avenues as FinTechs seek new paths to growth and survival.

For example, angel investing has jumped in popularity in recent years, becoming a vital player thanks in part to mainstream television, says Angela Lee, founder of 37 Angels and a VC professor at Columbia Business School.

“It has just exploded. ‘Shark Tank’ is the most watched family show in the world, and that means a lot of people have been introduced to this investing class that they didn’t know about a decade ago,” Lee told PYMNTS in a recent interview.

She said data-driven learners tend to stand out. So too, do founders who know how to run a quick experiment, test the market and quickly shift from their original idea if necessary.

“It’s not the person who sits in a room and comes up with a brilliant idea. It’s the person who knows how to respond to the market at [a given] time, because startups take a long time to grow and on average eight to 10 years to exit,” Lee explained.