Europe sees dramatic drop in Q1 VC exit activity

After a record-breaking 2021, European venture-backed exit activity fell substantially in the first three months of this year.

Total exit value in Q1 reached €7.7 billion (roughly $8.1 billion) spread across an estimated 296 deals. If the current pace for exit activity continues, 2022 will fall far short of last year’s high of €125.7 billion.

“The exit market has been sluggish so far in 2022,” PitchBook senior analyst Nalin Patel said. “Exit flow has been hampered as operators and investors embrace a wait-and-see approach rather than risk an exit that could prove costly and negatively impact the valuation of a portfolio company.”

Public listings suffered the most from the lackluster appetite for exits. Last year, a flood of VC-backed startups rushed to the public markets to capitalize on pandemic-related growth in tech. However, as markets entered correction territory in Q1, Europe saw just 16 listings compared with 44 in the same period in 2021, according to PitchBook’s Q1 2022 European Venture Report.

The fall in public listings was precipitated by rising interest rates, inflation and geopolitical concerns with Russia and Ukraine which sent investors fleeing from high-growth tech stocks. Furthermore, the record-high valuations obtained in 2021’s frothy environment are becoming harder to justify upon exit.

With the turmoil in the public markets, acquisitions are likely to become more attractive to VC investors looking to exit. In Q1, a total of 144 of such deals took place worth a combined €5 billion. Lower valuations for tech companies could prove a draw to strategic acquirers looking to grow their offerings.

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