European Investors Raised €6.6 Billion in 1H 2016, the Highest Amount of Capital Raised in Two Consecutive Quarters on Record
39% of total capital invested went to U.K.-based companies, according to PitchBook’s 1H 2016 European Venture Industry Report
SEATTLE — July 21, 2016 — 1H 2016 was a record first half for European investors, according to recent analysis conducted by PitchBook Data, Inc. Investors in the region raised €6.6 billion across 34 VC-focused funds, a 63% increase from the same period last year in terms of capital raised and the highest amount in a six month period on record. Despite this surge in fundraising, VC activity in Europe has plummeted: total capital invested into European startups dropped 27% from the first half of 2015 and 1H 2016 saw the fewest first financings since the middle of 2009. While Brexit’s long-term effects on the European VC ecosystem remain to be seen, these findings indicate that extreme uncertainty amongst investors and entrepreneurs has led investors to be increasingly risk-averse and less likely to put capital to work.
A Record First Half for European Investors
Index Ventures, Cocoon Networks and EQT Ventures are three VC firms that have contributed to the record €6.6 billion of capital raised in 1H 2016. These firms are also responsible for pushing the median VC fund size to a decade-high of €128.61 million, up 53% from 2015. At the same time, 1H 2016 saw the fewest number of funds under €50 million closed. Only four such funds were closed during the first half of the year.
VC Deal Activity Plummets
Despite surging fund sizes, investors are hesitant to put their money to work. Total capital invested into European startups dropped 27% year-over-year to €5.42 billion in 1H, spread across just 1,279 completed deals. This represents a 37% decline from 1H 2015 in terms of number of deals completed and the smallest amount since 2H 2011.
Early-stage startups are finding it increasingly challenging to secure funding. First financings dropped to just 346 in 1H, the lowest amount in two consecutive quarters since 2H 2008. But perhaps more surprising, late-stage companies are also suffering from this lack of capital. While in the U.S., unicorn companies are having no trouble finding large amounts of funding, 1H 2016 saw only 193 late-stage financings. This represents a 35% decline year-over-year and the lowest number of late-stage financings since 2H 2009.
"Several key regulatory and legal issues for both entrepreneurs and VCs are now in question in the wake of Brexit,” said Senior PitchBook Analyst, Garrett Black. “It will take quite some time to resolve the myriad of questions that now arise, such as whether UK-based funds will be allowed to market throughout the rest of the EU, as they had been previously under the AIFMD. Consequently, as so much remains up in the air, VC activity will continue to decline."
Deal Flow Dominated by U.K.-Based Companies
Of the €5.4 billion invested into European startups in the first half of 2016, a whopping 39% - or €2.1 billion - went to U.K.-based companies. This amounts to nearly three times the amount of capital invested in German startups (€765 million) and nearly 4x the capital invested in startups based in France (€557 million) over the same period.21.
Additional findings in this report include:
- VC deal flow/total capital invested
- Median fund sizes and time to close
- Median deal sizes by financing stage
- Most active industries for investment
- VC exit flow
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Stephanie Cook & Abbie Havern
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