[Pitchbook] After a bumper 2021, Europe's VC ecosystem kept up momentum in Q1 with €27.5 billion invested. Investment levels may have remained elevated despite a rise in interest rates, but the surge in the cost of living and ongoing uncertainty surrounding the war in Ukraine could make the rest of 2022 a challenging year.
Pitchbook's new Q1 European Venture Report takes a deep dive into the key trends that shaped this first quarter, breaking down activity across dealmaking, exits and fundraising, as well as regions.
Highlights include:
VC fundraising got off to a solid start in terms of capital raised, but fund count dropped significantly.
Late-stage VC continues to dominate deal value figures, accounting for 71.6% of total capital invested.
Exit value plummeted from 2021's heights amid a widespread tech public equity sell-off.
In Q1 2022, VC deal value with nontraditional investor involvement was on pace with 2021’s annual record. VC has developed into a major area for financial institutions in Europe over the past five years, and we expect a continuation of this trend as capital flows increase, high-profile exits take place, and awareness for the asset class grows on the continent. Deep synergies, strategic partnerships, and access to vast networks have helped portfolio companies and underlying corporate investors protect revenue streams from future volatility and drive growth in new areas.
European exit value fell drastically in Q1 2022 from the highs of 2021. Markets have entered correction territory, and the exit market has been sluggish so far in 2022 amid a tech public equity sell-off in Q1. Unrelenting inflationary pressure due to supply chain issues, trade tensions, and tight labour markets have resulted in increased interest rates in major economies, adding to a challenging public equity market backdrop. 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.
European VC fundraising got off to a solid start in 2022. Capital raised in Q1 was in line with the pace set in recent yearly figures. Healthy capital commitments for agnostic and specialist venture GPs have led to the creation of larger funds in the European ecosystem, with backers writing bigger cheques for startup funding rounds. Competition to participate in the best VC deals in search of outlier returns—and to commit to funds managed by the GPs with prestigious track records—has also enabled capital to enter the venture strategy.