European Venture Capital Dealmaking and Fundraising Activity Achieved New Annual Records in 2020
January 26, 2021
SEATTLE, January 26, 2021 – PitchBook, the premier data provider for the private and public equity markets, today released its 2020 Annual European Venture Report, which found venture capital (VC) deal value remained aloft and set a new annual record despite COVID-19 and the subsequent macroeconomic damage. Pandemic-induced opportunities and existing VC companies within technology and healthcare were well positioned to grow at the same time the deluge of capital deposited into larger rounds continued a decade-long trend. Capital from the US flowed freely into Europe and deal value with corporate VC (CVC) participation set a new annual record. After a lethargic start, exit value gathered momentum as the year progressed with one of the strongest quarterly showings ever in Q4. The pandemic created favourable market conditions for VC-backed companies seeking an exit in sectors such as biotech and pharma. European VC fundraising also achieved a record high in 2020 as LPs and GPs across the continent shrugged off long-term concerns posed by COVID-19. Fundraising processes have successfully adapted to remote tools, while larger VC vehicles have attracted burgeoning heaps of capital from existing and nontraditional investors to target pandemic-proof and pandemic-induced opportunities. Restrictions on travel, recessions and battered sectors have not stifled commitments from LPs, as GPs have been supplied with record levels of capital to put to work heading into 2021.
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“Few predicted the insatiable appetite to commit to and invest in VC in 2020. While other asset classes crumbled amid widespread volatility, Europe’s maturing VC ecosystem – and venture as an investment strategy – showed remarkable resilience with dealmaking, fundraising and CVC participation reaching record highs,” said Nalin Patel, PitchBook EMEA Private Capital Analyst. “We believe capital will continue to pour into pandemic-driven areas as recoveries commence and the allure of a return to normality will drive capital into resurgent pre-pandemic trends, both of which will combine to hold overall VC activity aloft in 2021.”
VC deal value reached a new annual record of €42.8 billion across 9,341 deals, representing a 14.8% year-over-year increase in value from the previous record set in 2019.
Deals sized over €25 million represented a record 61.8%, or €26.5 billion, of capital invested in 2020. CureVac’s €560.0 million late-stage round in Q3 was the largest deal of the year. Klarna, Deliveroo, N26, Revolut, and Northvolt all closed deals over €500 million as well, whereas just two companies raised such a sum in 2019.
Investors deployed €14.5 billion into the software sector across 2,123 deals, marking a marginal 7.9% year-over-year increase and more substantial 22.3% year-over-year decrease, respectively. The sector remains the most popular investment strategy, representing a third of total European VC deal value in 2020, but investment into biotech & pharma startups jumped 41.1% year-over-year to €5.4 billion as COVID-19 held attention globally.
All regions apart from Central & Eastern Europe beat their respective deal value figures from 2019. The UK & Ireland remained the highest deal value provider with a record €14.3 billion in 2020, providing a third of the total in Europe despite Brexit.
CVC participation accrued €19.4 billion in value through 2020, easily surpassing the previous record of €15.6 billion set in 2019. CVCs participated in many of 2020’s largest rounds, including Deliveroo’s €527.6 million round and Hopin’s €106.2 million round.
Despite market volatility, total European VC exit value rose 13.9% year-over-year to €18.6 billion across 697 deals. The European exit market gained momentum after a lethargic Q1, closing on €7.6 billion in value in Q4.
Biotech & pharma companies capitalized on increased interest in the sector, securing €6.7 billion in venture exit value in 2020, or 35.9% of Europe’s total. Notable exits in the sector include the IPOs of CureVac and ADC Therapeutics, both totalling over €200 million, and the acquisition of Themis Bioscience, which sold for €1.1 billion.
As was the case in 2019, the DACH region (Austria, Germany, and Switzerland) generated the most liquidity of any European ecosystem, closing on €4.6 billion in 2020, or 24.7% of the continent’s total. The region’s expertise in developing highly valued biotech & pharma companies bolstered exit figures.
VC-backed IPOs grew slightly to 50 in 2020 from 46 in 2019, suggesting that some startups were bullish and willing to list even amid such a turbulent year. The resurgence of public equities and lack of listings in the second and third quarters created pent-up demand for IPOs, and healthcare startups such as Compass Pathways, Freeline and Nanox decided it was the perfect time to exit.
European VC funds raised a record €19.6 billion in 2020, representing a 35.2% year-over-year increase as LPs and GPs across shrugged off long-term apprehension posed by COVID-19. The quantity of closed VC funds ticked up to 172, reversing a two-year decline.
VC funds over €100 million represented 82.0% of the total capital raised in Europe in 2020, just below the peak of 83.8% set in 2019, and we expect they will continue gaining share in 2021. Fund sizes have climbed during the last decade, buoying overall capital raised year to year.
The UK & Ireland raised the most capital for venture funds with €5.1 billion, narrowly topping the DACH region, which raised €5.0 billion in 2020. Israel-based VC funds have now raised over €1.0 billion in each of the last five years, with a record €2.7 billion raised in 2020, and we believe GPs based in this region have the capital resources to develop their ecosystem even further and compete globally for commitments.
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