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European Venture Capital Exit Activity, Investments and Fundraising Hit Pause in 3Q

October 20, 2016

European Venture Capital Exit Activity, Investments and Fundraising Hit Pause in 3Q

PitchBook Releases 3Q 2016 European Venture Industry Report

SEATTLE — October 20, 2016 — On the heels of a record-breaking first half of the year, European VC activity experienced a slowdown in the third quarter, according to recent analysis conducted by PitchBook Data. Despite European investors raising €6.6 billion in 1H 2016--the highest amount of capital raised in two consecutive quarters on record--just €730 million was raised across six vehicles in 3Q, down from the 11 funds raised in 3Q 2015. Venture capitalists invested €2.63 billion across 577 completed transactions in 3Q, representing a 38% year-over-year decline in capital invested and a 31% drop in deal count. Exit activity in Europe also took a tumble in 3Q, down 45% from the total number of exits in 3Q 2015.

"Due to an unprecedented level of activity in the first half of the year, European VC fundraising is still on pace to finish the year at the highest level on record,” said Nizar Tarhuni, senior analyst at PitchBook. "However, we’ve seen a distinct pause in exit activity in the third quarter. This may represent a return to the norm or we may be seeing some of the effects of Brexit as strategic acquirers navigate an uncertain economic and political environment."

UK/Ireland Spotlight: U.S. Investments Driving Healthy VC Activity

Despite an overall slowdown in European VC activity in the third quarter, investments in the U.K. and Ireland remained somewhat stable--due, in large part, to participation from U.S. investors. In 3Q, venture capitalists poured €1.01 billion into 207 completed financings in the region, including investments into on-demand delivery service Deliveroo and cyber defense company Darktrace. Of the 207 financings completed during 3Q, 136 involved participation from U.S. investors--a whopping 66% of total deal activity and the highest level of involvement by U.S. investors since 2008.

In line with broader European trends, fundraising and exit activity both saw a decline in 3Q. Investors raised €527.5 million across just three funds in the UK and Ireland, including Northzone Ventures’ €300 million fund and Joy Capital’s €188 million fund. Meanwhile, there were a total of 20 exits in the region during 3Q, representing a 51% quarter-over-quarter decline.        

3Q Exit Activity Plummets

Exit activity also dropped off considerably in 3Q. Total exit value amounted to €1.32 billion for the 64 completed transactions - including notable exits like Enablon, Lampiris and Ticketbis - representing a 35% quarter-over-quarter drop in exit count and a 66% drop in total value. This decline in activity was most notable in M&A exits, which fell to the lowest count since 2009. Only 48 acquisitions were made during the period, and total capital exited dropped 57% quarter-over-quarter.

Due to a healthy first half of the year, 2016 is on track to record the second highest amount of capital exited in the decade. Through the end of 3Q, €10.6 billion has been exited across 247 completed transactions.

Despite a Decline in 3Q Deal Count, Investment Value Remains Strong

While overall capital invested remained somewhat elevated, VC deal count fell considerably, dropping from 695 completed transactions in the second quarter to 577 in 3Q. Despite the decline in activity last quarter, 2016 is still on pace to record the second highest level of capital invested in the last decade.

Similar to global venture capital trends, angel and seed investments saw the steepest decline in completed financings in the third quarter with only 242 angel/seed rounds completed--the fewest since 2012. At the same time, the number of first financings reached the lowest number since 3Q 2009.

France/Benelux and the Southern European region experienced the most significant declines in VC activity with deal count falling to 81 and 42, respectively.

Following a Record First Half, 3Q Fundraising Activity Drops

Through the third quarter, €7.48 billion was raised across 43 vehicles, putting European VC fundraising on pace to record the highest amount of capital raised in the last decade. Despite raising a massive €6.75 billion in the first half of the year, fundraising levels declined significantly in the third quarter. European venture capital firms raised €730 million across only six vehicles in 3Q, representing a 74% decline from the same timeframe last year and the smallest number of funds raised in the past decade.

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

 

Download the full report here.

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