Venture capital fundraising is still a struggle in Europe with its third year of decline, but a handful of mega-funds have managed to close and expand their share of the pie.
Roughly €20 billion (about $20.99 billion) has been raised in total, according to PitchBook data, and the year is expected to wrap up at a decline of 53% year-over-year. That sum is spread across only 161 VC vehicles, putting 2024 on track for the lowest count in a decade and 66% under the peak of 467 funds in 2022.
Around a third, $6.7 billion, of the European VC capital raised came via mega-funds, vehicles worth over €500 million. Mega-funds have also registered their highest share of closes at 7.3%—a decade ago, fewer than 1% of funds were of that size.
The growth of mega-funds is a natural consequence of a maturing ecosystem, but their increased presence in Europe has been accelerated by the wider downturn in the VC market over the past few years.
For many smaller European funds, family office or entrepreneur commitments are vital for fundraising, but the lack of liquidity in the VC market has been limiting.
First- or second-time funds are generally too small to attract the attention of institutional investors, who have increasingly gravitated toward experienced managers.
As a result, investors with four or more funds accounted for nearly two-thirds of capital raised in 2024, according to PitchBook’s Q3 2024 European Venture Report.
Europe’s VC market is becoming more concentrated; in fact, among the largest funds to have closed this year, many come from the same investors. Index Ventures’ seventh growth fund is at the top of the list, yet its eighth flagship follows in third. Atomico also has two vehicles on the list, including a growth fund.
Venture growth is gaining more attention in Europe as traditionally early-stage firms expand their investment scope. Atomico’s growth fund was its first dedicated to the strategy, while Balderton Capital raised $685 million in August for its second growth vehicle.
Europe has historically relied on foreign or nontraditional VC investors for its growth funding, which is lacking compared to other markets. According to Atomico, US tech startups are 40% more likely to have raised VC funding after five years than their European counterparts.
With more domestic players in the market, growth investing is expected to pick up, and there are signs that it already has. This year, venture growth accounted for 5% of overall deal count—its highest percentage in a decade.
Featured image of Index Ventures partners Neil Rimer, from left, and Danny Rimer by John Phillips/Getty Images
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