Europe set to break venture capital and growth records
Although North America has historically dominated the venture and growth capital industry, and Asia has captured attention for its meteoric rise, Europe has seen growing activity in recent years, according to new data released by Preqin.
In 2008-2015, Europe-focused venture capital and growth fundraising failed to exceed EUR10 billion in any single year. However, 2016 and 2017 both saw capital totals exceed that level, reaching EUR15 billion and EUR12 billion respectively. The first seven months of 2018 have already seen funds targeting the region secure over EUR11 billion from investors, putting the year on course to set new records. Europe has also seen an increase in venture capital deal activity, and 2017 saw a record EUR16 billion in total deal value. With EUR11 billion in deals already recorded at the end of July, 2018 looks likely to surpass this record too. The UK accounts for the largest proportion of Europe-based venture capital deal activity, while Germany and France also account for significant proportions of activity.
Europe-focused venture capital and growth fundraising reached EUR15 billion in 2016 and EUR12 billion in 2017, as the region surpassed EUR10 billion for the first time. 2018 is on track to set new records – it has already seen 54 funds secure over EUR11 billion.
Europe-focused venture capital deal activity is also on track to set a new record in 2018: following a record- breaking 2017, there have already been 1,403 deals worth EUR11 billion in 2018 YTD.
The UK has accounted for 32 per cent of deals announced in 2013-2018 YTD, and 36 per cent of deal value – the largest proportions. Germany also saw significant deal activity, accounting for 14 per cent of the number of deals and 18 per cent of aggregate deal value.
Notably, the 10 largest venture capital deals in Europe since 2017 have all taken place in the UK or Germany. Nine of the 10 are for internet or IT companies, in line with global trends.
There have been 95 venture capital exits in Europe totalling EUR11 billion in 2018 so far. Trade sales to corporate acquirers represent the largest share, accounting for 73 per cent of transactions and 69 per cent of exit value.
A quarter of investors surveyed by Preqin in June 2018 found that venture capital represents the best opportunities globally over the next 12 months, and a further 21 per cent said the same of growth funds.
After North America, the next largest proportion (36 per cent) of investors surveyed view Europe as presenting the best opportunities in venture capital over the next 12 months.
“Venture capital and growth investment activity in recent years has been a tale of two regions – the contest between North America, still regarded as the preeminent home of the technology and startup industry, and Asia, the swift- expanding home of tech giants like Didi Chuxing and Ant Financial,” says Christopher Elvin, Head of Private Equity Products. “Asia’s rise has perhaps somewhat overshadowed Europe as an area of growth for the industry, but clearly it is in good health. 2016 saw fundraising exceed EUR10 billion for the first time, a level likely to be surpassed in 2018. Deal activity is similarly on course to reach an all-time high.
“Just as the industry in North America is highly concentrated in the US, and the industry in Asia is focused on China and India, venture capital activity in Europe is dominated by the UK, Germany and France. This is perhaps not surprising, given that these are the largest economies in the region, but what is encouraging is that recent highs in activity have not been driven by just a few large deals. It is true that Europe is home to fewer multi-billion-dollar venture capital-backed companies that command mega funding rounds, but the wider distribution of activity is indicative of a broad-based startup industry. With investors favouring Europe as one of the regions presenting the best opportunities over the next 12 months, the region is likely to see its venture capital market grow even further.”