According to a report by venture capital firm Atomico, the total amount of money invested in European tech startups is expected to drop to $45 billion this year, a 55% decrease from 2021 when investment volumes surpassed $100 billion for the first time.

According to the report, investors’ slower pace of deployment and later-stage companies’ delays in raising capital were the main causes of the decline. $82 billion in capital was invested in Europe in 2022.

“Some of the startups who raised large sums in 2021/early 2022 to hit their billion-dollar valuation will see their valuations drop below the billion-dollar mark,” said Tom Wehmeier, a partner at Atomico.

“I expect to see more of this next year as those companies are likely to be running out of runway at this point, and will need to return to market in 2024 or 2025 to survive,” he said.

According to Atomico, 257 European tech companies—including over 150 in 2021 and 2022—reached a billion-dollar valuation during the five years between 2018 and 2022.

Even so, funding rounds in Europe will still be 18% higher in 2020 than in 2021—a year ahead of the tech investment boom. According to the report, in contrast, the United States, China, and other nations are expected to achieve flat or lower 2020 figures.

“When you consider how overheated those two years were, the fact we are up from 2020 suggests that Europe is heading in the right direction, especially since it is the only global region to be up since 2020,” Wehmeier said.

In the next five years, Atomico projects that the number of European early-stage startups will rise from 41,000 to over 66,000, while the number of growth-stage startups—those that have raised at least $20 million—will double to 8,000 during the same time frame.