In Q3 2024, European venture capital experienced a decline in deal activity alongside a stagnant fundraising landscape, noted Pitchbook in its first look report, published on Wednesday 2 October 2024. Photo: Shutterstock

In Q3 2024, European venture capital experienced a decline in deal activity alongside a stagnant fundraising landscape, noted Pitchbook in its first look report, published on Wednesday 2 October 2024. Photo: Shutterstock

European venture capital deal activity experienced a slight decline in Q3 2024, with decreased deal counts and overall activity, although exit values surpassed 2023 totals and macroeconomic conditions suggested a potential recovery ahead, reported Pitchbook.

European venture capital activity experienced a slight decline in deal activity during the third quarter of 2024, financial data and software company Pitchbook on 2 October 2024. The report highlighted that, despite a significant increase in deal value during the second quarter, Q3 experienced a slight decline in both the number of completed deals and overall activity levels. This downturn followed a period of strong growth that peaked in 2021, indicating a change in investor behaviour as they became more selective in their investment decisions.

The report indicated that deal counts were down quarter on quarter, further emphasising the challenging environment for VC investments. Such trends highlighted the current market’s cautious atmosphere, where investors appeared to be prioritising quality over quantity in their transactions. As firms navigated these complexities, it became evident that fewer deals were closing as investors remained discerning about their commitments. Pitchbook also pointed to a broader stabilisation in VC activity compared to the peaks seen in previous years, which had raised concerns about unsustainable growth.

However, there were positive signs as the year progressed, particularly regarding macroeconomic conditions. The loosening of monetary policy and the normalisation of inflation rates created an environment that could potentially enhance investor confidence and stimulate market activity as the year approaches its conclusion, stated Pitchbook in the report.

Exit activity

In terms of exit values, the data through Q3 2024 revealed a noteworthy trend: the total value of exits had already surpassed the entire annual figure recorded in 2023.

This development fostered a sense of optimism in the markets, particularly given the scarcity of major VC-backed exits in the previous two years. The lack of significant exits had posed challenges for many investors, as the ability to realise returns on investments is critical for sustaining and growing VC operations. Pitchbook suggested that a rebound could be on the horizon, contingent on a recovery in public markets, which have been a key avenue for exits. Nevertheless, the report also highlighted that risk remained a critical factor for exits, especially concerning valuation, returns and market volatility.

Fundraising activity

The fundraising landscape for VC firms remained flat through Q3 2024 compared to the total figures from 2023.

Pitchbook attributed this stagnation to the challenging macroeconomic conditions and a difficult exit environment, which complicated fundraising efforts. Although larger funds managed to close successfully in 2024, much of the capital remained tied up in portfolio companies awaiting exits. This scenario created a backlog in capital that could otherwise be reinvested into new ventures. The report posited that fundraising activities could see an uptick in 2025, provided that exit opportunities increase and capital is recycled back into VC funds.

Importantly, as venture capital investments typically serve as a vital source of funding for startups and growth-stage companies, a slowdown in activity could hinder innovation and development in several sectors, Pitchbook cautioned.

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