Many European startups are still struggling to raise capital as venture dealmaking continues to decline.
VC-backed exits and fundraising are on track to miss last year’s figures, contributing to a lack of liquidity for new investments. PitchBook’s Q2 2023 European Venture Report breaks down five key trends that have defined the region’s VC market in the first half of this year.
European estimated VC deal count and value both dropped significantly in H1 with declines of 33.7% and 63.1%, respectively, compared to the first half of 2022.
Q2 saw its lowest quarterly figure for deal count since Q3 2016 as investors conserve capital. However, recovery in the public markets this year could signal that a rebound for VC may be on its way.
Early-stage VC accounted for the largest percentage of European VC rounds in Q2 with 35.4% of overall deal count. Late-stage VC increased its share of deal count, rising from 31.2% in Q1 to 31.8% in Q2.
Angel and seed funding’s share of deal count had its fourth consecutive quarterly decline, as investors prioritized follow-on funding over new investments.
US investors have pulled back their investments in Europe due to the overall slowdown in VC dealmaking and a reduced appetite for cross-border deals.
US participation in European VC deal value fell 69.2% year-over-year to €4.6 billion (about $5.1 billion) in Q2. Only 18.7% of European VC rounds in the second quarter featured US investors—the lowest percentage since Q1 2021.
Acquisitions remain the most popular exit route for VC-backed companies in 2023 with 299 completed in the first half of the year.
Public listings have had the biggest decline in exit count, falling 83.1% from 2022 to stand at just 11 exits. Israel cybersecurity company HUB Security‘s $1.3 billion SPAC deal was the largest exit in H1, but its share price has since fallen significantly.
European VC-backed fundraising activity remains muted this year with €8.9 billion raised across 60 vehicles. At its current pace, fundraising activity will fall short of 2022’s numbers, both in terms of count and value.
Featured image by i am adventure/Shutterstock
