Specialization continues to influence Europe’s VC & Growth Market
Europe’s venture capital industry is still trying to find its feet, as it recovers from a sluggish 2023. The second quarter of the year was encouraging, with $15.6 billion raised. However, Q3 was a tougher fundraising period, during which late-stage funding fell by more than 50% y-o-y. As noted by Crunchbase, early-stage funding to European start-ups declined 12% y-o-y. This hasn’t quelled appetite among VC managers, with a number of new fund launches in recent weeks including London-based Atomico, who raised $1.24 billion across two funds. On the growth side, Resurge Growth Partners recently launched a EUR120 million venture equity fund to back European and Israeli start-ups.
Total VC capital for 2024 is forecast to hit $18.8 billion and as was referenced in IPEM’s Weekly Spin, the European Union is taking measures to address the innovation gap between Europe and the US and China. The new initiative, dubbed the Trusted Investors Network, will see the EU partner with European venture capitalists to support technology investment, and help catalyze growth in deep tech companies. In total, some 71 investors with combined assets of EUR90 billion have signed up to the new initiative.
Sourcing the highest quality deals has become highly competitive, including Series A and Series B deals, as European VC firms look to deploy capital. And as was noted during the Venture & Growth Summit at IPEM Paris 2024, there are signs that Europe’s VC market is becoming more sophisticated, where deals are more downside protected. Investors are spending a lot more time on valuations, resulting in a longer time for deals to get to market. Later stage instruments like IPO warrants are being used, to realign valuations at the time of exit, as deal structures evolve.