Germany, China, India… the tumultuous year of start-ups

Posted on January 2, 2023, 7:30 am

The first Italian unicorns, SoftBank’s record losses, regulatory tightening in China… The year 2022 was very busy on the planet of startups. Overview of facts that marked the American, European and Asian ecosystems.

UNITED KINGDOM: abused champions

Although the United Kingdom (still) remains the European country that attracted the most investment in 2022, it suffered from the collapse of the venture capital market. British startups raised 30 billion last year, compared to 32.4 billion in 2021. It was in the second half that funding dropped dramatically – 8 billion raised – according to the specialized website Dealroom.

Many British startups have laid off en masse. Fast food delivery start-up Zapp was one of the first with more than 200 employees affected. The used car sales website Cazoo, in turn, carried out two waves of layoffs (750 and 750) throughout the year.

2022 was also a difficult year for Britishvolt, a specialist in electric vehicle batteries, which has not yet received the funds promised by the government and narrowly avoided liquidation. His gigafactory is far from complete and employees have taken a pay cut.

GERMANY: the end of the gold rush

After a wave that took Germany to the top of investments in startups in Europe in 2021, the party is over. German startups raised 43% less in 2022, reaching $10.8 billion. Unicorns considering going public like N26 and Solaris put their projects on hold and were forced by German financial market authority Bafin to better control their growth.

After the successes during the confinements, the German experts in home delivery are distributed between those who cry like the Gorillas, just taken over from Getir, and those who laugh, like Flink, who announced a partnership with Carrefour.

Some sectors, however, scored points: greentech, such as the specialist in solar installations from Enpal, which raised 855 million euros in debt, and software for companies such as Celonis (process automation) or Personio (personnel management). The latter confirmed their status as the most valuable startups in Germany in 2022, with 11 and 8.5 billion dollars, respectively.

ITALY: the first unicorns

It’s two! This year, the country conquered its first two unicorns, the fintechs Scalapay and Satispay, both based in Milan. While the European ecosystem shows a 9% drop in venture capital investments, Italy projects a 64% growth, according to Dealroom, to reach US$ 1.7 billion.

The third quarter of 2022 is the most dynamic in the country’s history, with more than 830 million raised in that period. Note, for example, the turn of proptech Casavo (400 million euros), which took the opportunity to buy the French company Proprioo and launch it in France.

The family that owns Ferrari (Les Agnelli) also launched at the beginning of the year a program similar to the famous Y Combinator. It is part of the investment strategy of Exor, the Italian family fund, which has already bet on fifty startups including French unicorns like Alan and Qonto.

ISRAEL: Cybersecurity was not spared

The “start-up nation” is also suffering from the market downturn. Israeli startups raised just $9.8 billion in the first half of 2022, down 30% from the 2ndand half of 2021. According to various estimates, the total amount collected in 2022 reached US$ 15 billion, against US$ 25.6 billion in 2021.

As a result, layoffs are on the rise in the industry and are expected to affect around 20,000 people, according to estimates by the Israel Innovation Authority. In 2022, more than 50 companies were laid off, including in cybersecurity, a particularly flourishing sector in Israel – this is the case of Cybereason and Snyk, two unicorns in this field.

That said, for sector specialists and the Bank of Israel, it is mainly about “a market correction” that follows fourteen years of uninterrupted growth.

INDIA: The Unicorn Factory

Contrasting results for India. In May, SME neobank Open crossed the $1 billion valuation mark, becoming India’s 100th unicorn. The world’s third-largest start-up ecosystem now has more than 84,000 start-ups, up from just 450 in 2016, according to official statistics.

Fintech is one of the fastest growing sectors in the country, with an adoption rate of 87% (compared to 64% globally). In a speech in late 2021, Indian Prime Minister Narendra Modi said that fintechs were “the foundation for a financial revolution”.

However, Indian startups did not escape the “financial winter” that forced them to lay off more than 20,000 employees. Even Byju, an edtech valued at $22 billion, was no exception and had to shed 5% of its workforce, or more than 2,500 people.

CHINA: Tech rage

With its zero covid policy that has weighed on Chinese growth and the government’s dominance over some of the country’s tech flagships, China is wrapping up a busy year. The sanctions continued in the sectors of transport, social networks or even video games.

But the country has also shown signs of slowing down, for example allowing the redeployment of the VTC Didi app (despite a record fine) or granting new licenses to small video game publishers.

In December, the government announced a relaxation of its zero covid policy, hoping to end the economic crisis in the country. But to this must be added the US sanctions against China on semiconductors, an essential material for the high-tech industry.

Venture capital funding of Chinese nuggets shows a significant drop of 56%.

JAPAN: SoftBank has a hangover

It’s been a tough year for the Japanese ecosystem. And especially for SoftBank, a telecommunications juggernaut that is making technology rain and sun with its two gigavehicle investments (Vision Fund I and II).

Weakened by the fall in technology stocks, investments in sometimes risky start-ups and high interest rates, the Japanese fund lost all the gains made so far and suffered the departure of several of its executives, such as Marcelo Claure or Michel Combes, who played an active role in the hatching of several French unicorns in 2021.

If Japan shined in technology in the 1980s, the country missed the startup train and has only six unicorns. To create new momentum, the authorities want to build an incubator inspired by Station F in Paris.

UNITED STATES: A long winter in San Francisco

The drop in public tech values ​​in early 2022 was quickly felt in the world of private start-ups in Silicon Valley. The main players in the ecosystem, such as Y Combinator or Sequoia Capital, have indicated that the worst is to be expected in the next twelve to twenty-four months: funding depletion, falling valuations, budget revisions, etc.

His predictions proved correct, as Silicon Valley accounted for less than 20% of US fundraising in the third quarter of 2022, something unheard of. Waves of layoffs multiplied even at prominent companies like Stripe (14% workforce cut).

Californian start-ups have a habit of making quick layoffs… only to make equally quick hires a few months later.

UNITED STATES: Rollercoaster in New York

New York has had a rollercoaster year. The ecosystem got off to a good start, notably with the rise of Hugging Face, the last unicorn founded in the Big Apple by the French. Then a freezing cold settled in the universe of venture capital and caused a drop in investments. Tiger Global Management, a hedge fund particularly active in tech in 2021, for example, cut its sales.

Faced with the crisis, several New York start-ups (Convene, Noom, Invision, Glossier, Better.com, etc.) laid off employees, often without taking the tongs. Symbol of the new business climate, the AI ​​specialist Dataiku, which was also founded by French people who moved their headquarters to New York, saw its valuation fall in December during its last round of funding (3.7 billion against 4.6 billion a year before).

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Catherine Dupeyron, Adrien Lelièvre, Charlie Perreau, Clément Perruche, Nathalie Steiwer e Camille Wong

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