News & Analysis

driven by the PitchBook Platform
gettyimages-170619460.jpg
Bankruptcy

European startup bankruptcies lie low while new company creation stalls

Harsher funding conditions have slowed new startup formation, but the downturn has yet to impact startup failure rate.

VC-backed bankruptcies in Europe remain low this year, but increasing pressure on venture investments has slowed first-time financings.

Some 156 VC-backed companies have filed for bankruptcy since the beginning of the year, according to PitchBook data. If that pace holds, the annual total will fall below 2022’s figure.

 

The slowdown in VC investments that began last year caused some concern that companies faced with rising operating costs would begin to run out of money, but the increase in bankruptcies has yet to materialize.

Many startups have likely staved off failure by focusing on extending runways by cutting costs—including layoffs. VCs have also prioritized follow-on investments in existing portfolio companies.

However, this means that new startup formation, as measured by first VC financing, has fallen as managers avoid new investments. This year, 1,619 first-time financings have closed in Europe, compared to 3,876 in 2022.

The pace of first-time financings has slowed considerably, with 2023 on track for the lowest annual total in almost a decade. And if funding challenges continue, failures may be on the rise as more startups exhaust their runways.

European startup bankruptcies tend to concern smaller startups with less funding, but this year has seen a handful of larger failures. Spanish laundry service company Jeff was liquidated in June, having previously raised $41.4 million from backers including Mundi Ventures and FJ Labs. In February, Dutch electric vehicle startup Lightyear, which secured over $200 million in funding from the likes of Invest-NL, was forced into bankruptcy.

Featured image by Fentino/Getty Images

  • leah-hodgson-photo.jpg
    About Leah Hodgson
    Leah Hodgson is a London-based senior reporter for PitchBook, covering the venture capital ecosystem across Europe and the Middle East. Leah, who joined PitchBook in 2018, graduated from the University of Surrey with a BA in international politics with French. She has previously been a radio reporter in France. She later turned to financial journalism, covering the wealth management industry.
Join the more than 1.5 million industry professionals who get our daily newsletter!

I agree to PitchBook’s privacy policy