BY Fraser Tennant
European venture capital (VC) dealmaking fell significantly in Q3 amid uncertain macroeconomic conditions and market turmoil across the continent, according to new analysis by Pitchbook.
In its ‘European Venture Report’, Pitchbook reveals that venture dealmaking across Europe dipped in Q3 2022 as market conditions become increasingly challenging, with deal value falling 36.1 percent quarter-over-quarter to €18.4bn – the lowest figure since Q4 2020.
However, against this backdrop, non-traditional investors have remained active in Europe’s start-up scene, with several types of non-traditional investors completing deals through Q3 2022. These include private equity giant Advent International which invested €250m into Spain-based artificial intelligence advertising company Seedtag to fuel expansion into the US.
“Despite markets entering correction territory globally, non-traditional investors have continued to participate in VC rounds,” said Nalin Patel, lead analyst, EMEA private capital at Pitchbook. “However, with overall deal value falling in Q3, and anticipated to flatten further, we believe non-traditional investor involvement will mirror wider market sentiment.”
The Pitchbook report also reveals resilient VC exit activity, with exit count on track for its second-best year ever with 878 year to date (YTD). “Given that we have moved from a macroeconomic environment beneficial to VC exits in 2021 with low interest rates, low inflation, and high valuations to one with increasing interest rates, stagflation, and dropping valuations in 2022, VC exits have remained resilient,” added Mr Patel.
In terms of VC fundraising activity, the market remains healthy, with 145 closes totalling €19.7bn in aggregate – a pace which, should it continue, will see fund count finish below, and capital raised land above, figures from 2021 at the year’s conclusion.
“While pace throughout 2022 YTD kept up with 2021, Q3 has delivered the decline in dealmaking activity many analysts anticipated this year,” concluded Mr Patel. “We believe capital efficiency, rather than growth at all costs for latestage investments, has established greater importance in recent months and expect this to continue until 2023.”
Report: Q3 2022 European Venture Report