European venture fundraising fell from €33.3bn in 2021 to €28.23bn in 2022. In 2023, it plummeted to €16.2bn, aligning with global patterns.
As for deal value in the European market, Pitchbook--in its 2023 Global Venture Capital First Look report, published on 4 January--records a 22% decline quarter-on-quarter and 32% year-on-year in Q4 2023.
On a global basis, Pitchbook VC analysts Kyle Stanford and Nalin Patel note that “fundraising sluggishness in 2023 will add to the low capital availability within the venture market moving forward. 2023 was the lowest year for global VC fundraising since 2015. The $160bn raised by VCs during the year is more than $200bn less than in 2021.”
Here are a few takeaways from the report.
Dealmaking in Europe down in Q4
European private equity deal value dropped in Q4 2023 to reach €12.8bn. This figure is down 22% compared to Q3 2023 (€16.4bn) and down 32% when compared to Q4 of 2022 (€18.9bn), but it was still higher than pre-2020 figures. “Despite the slowdown in dealmaking, median deal sizes for EU-based startups remained at or [hit] new all-time-highs across all stages of VC. Concurrently, valuations continued to be historically high within the market,” commented Patel.
Europe’s deal count decline
In terms of deal count in Europe across 2022 and 2023, 1,708 deals were done in Q4 2023, a 19% decline quarter-on-quarter and a 42% drop compared to Q4 2022.
“European dealmaking continues its descent, with the Q4 deal count falling to the lowest total since Q3 2018,” observes Patel.
In the US VC market, Stanford comments that the decline in deal activity in 2023 persisted from the peaks observed two years earlier. Despite 15,766 completed deals, the industry faced a significant challenge as only $170.6bn was invested in companies, half of that made in 2021, confirming the scarcity of available capital for private companies.
Exit value again low
Exit values continued to drop for the third year running, noted Pitchbook, reaching €2.2bn in Q4 2023. This is down 42% quarter-on-quarter (the figure for Q3 stood at €3.9bn). This represents a 66% decrease when compared to Q4 2022 and a major drop of 91% when compared to Q4 2021.
Patel commented that “each quarter during 2023 realised less than €4bn in exit value. The €11.8bn in annual exit value was the lowest for the market in a decade.” Regarding the US, observes Stanford, “exits returned just $61.5bn to investors during the year. Large tech IPOs were especially sparse considering the high number of unicorns that remain private. The inability to return money to investors has challenged the free-flowing capital into VC.”
Compared to the global trends, the Pitchbook analysts said, “though exit activity remains subdued globally, Asian markets realised the highest exit value during each quarter of 2023. More than $143bn in exit value was generated in Asia over the course of the year, while in North America just $66.6bn was generated through VC-backed exits. Though Asia as a region is made up of many individual country markets, just once since the beginning of 2019 has a quarter seen less than $20bn in exit value created collectively, while in North America just one quarter in the past five has generated more than $10bn.”