Curious about the key takeaways from our 3Q European Venture Report? Check out the selected charts below to get a taste of the latest VC trends in Europe and Israel.
Spending more on less
One major pattern in European and Israeli venture capital this year has been the presence of more money going into fewer deals. In each quarter of 2017, deal numbers have fallen while capital expenditure has increased. At the moment, deal value is approaching a level not seen since 1Q 2016.
Round sizes ramp up (€M)
While huge one-off deals such as SoftBank’s $502 million round into Improbable have certainly moved the needle, the main reason for the growth in capital expenditure has been a sustained increase in round sizes at all levels. The median round sizes for angel/seed, early-stage and late-stage VC deals have all increased—with median angel/seed transactions in Europe and Israel breaking the €800,000 threshold for the first time in a decade.
Tech control
VCs have always been attracted to technology-focused companies, and that stranglehold is getting stronger in Europe and Israel. Tech businesses now account for more than 75% of all deals and money spent in the regions.
US investors boost prominence
After tailing off their activity last year, US investors have participated in close to a fifth of all VC deals in Europe and Israel through 3Q 2017. A chunk of this can be attributed to the larger round sizes attracting more senior and sophisticated backers from across the pond—a more recent example of which is Sequoia Capital’s $50 million Series C investment into UK-based AI chip startup Graphcore.
Corporate venturing makes presence felt
The venture arms of companies have become increasingly busy in the last few years. However, 2017 could be the first time CVC deals in Europe and Israel decrease, with a projected total of 579 compared with 622 last year. There’s no cause for panic, however, with the total deal value still quite strong.
Pharma flops
Despite the impressive expenditures elsewhere, the pharma & biotech sector has seen numbers fall this year, putting it on pace for fewer than 200 deals for the first time since 2009. To compound things, pharma & biotech, unlike other industries, hasn’t had the value uplift to compensate.
Spotlight on Israel: Value remains high...
Israel’s VC activity has largely been following the overall trend, with value remaining buoyant despite a drop in deal numbers. Indeed, by the end of September, this year’s value figure for Israeli VC had already surpassed 2015’s total.
...but first financings collapse
In contrast, the number of first-time fundings for Israeli companies has fallen dramatically in the past two years. Israel’s venture scene has matured considerably, with the median late-stage deal size rising to €14.5 million this year, compared with €13.5 million in 2016, and median early-stage fundings rising by nearly €2 million to €6.7 million over the same period.
Blocked exit routes
In a similar fashion to European private equity, VC-backed exits are continuing a yearly decline across the continent and Israel. Just €8 billion has been exited across 281 deals in the first nine months of 2017, putting this year way down in terms of volume.
Buyouts buoyant
IPOs and corporate acquisitions have fallen as a percentage of overall exits in Europe and Israel. One reason for the fall in flotations has been the increase in VC round sizes, with institutional investors in some cases choosing to invest in developed startups at the late stage, rather than pick up shares through a listing.
Acquirers, meanwhile, will be busy embedding their previous deals after a record amount of M&A activity last year, leaving PE buyers with less competition to unload their massive capital war chests.
Funds flatten
VC fundraising in Europe looks like it will continue its steady decline since 2011, although capital raised is slated to remain relatively high—indeed, the €6.1 billion raised across the first nine months already surpasses 2014’s total.
This growth in value and decline in volume can be attributed in the dissipation of micro funds and rise of small- and mid-cap vehicles, which now account for almost half of all funds raised, compared with just 12.5% five years ago.
Download the full 3Q report by clicking here.
