Apr 26, 2018   SOURCE: PR NewsWire

European Venture Ecosystem on Track to Match 2017 Total VC Deal Activity

European Venture Ecosystem on Track to Match 2017 Total VC Deal Activity

Deal Sizes Ballooned Across All Stages as VCs Raise Larger Funds; Exit Market Remains Sluggish with Just Two Deals Making up 73% of Exit Value

SEATTLE and NEW YORK and SAN FRANCISCO and LONDON, April 26, 2018 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today released its 1Q 2018 European Venture Report, which uncovered a steadily maturing European venture ecosystem on pace to nearly match capital deployed in 2017. While deal count declined nearly 50% from 1Q 2017, European investors deployed EUR4.4 billion across 571 deals in the first quarter. German financings accounted for one quarter of all venture capital raised in Europe & Israel, driven in part by larger rounds secured by late stage unicorns, including Auto1 Group's EUR460 million financing from SoftBank and N26's $160 million Series C (EUR129.5 million). As median deal sizes trended larger, so too did fund sizes. While fundraising levels fell short of 2017 fundraising metrics, median fund size reached a decade-high at EUR86 million. The proliferation of available capital for late stage companies has consequently slowed exit activity.

"Deals sizes continue to grow as the European VC ecosystem matures and larger vehicles are raised," said Joelle Sostheim, analyst at PitchBook. "While larger funds will be important to the growing population of mature startups, the decline in smaller vehicles raised in recent quarters could have an adverse effect on the next-generation of startups seeking smaller rounds. Deals smaller than EUR1 million dwindled in the first quarter."

Investment Activity 

    --  In the first quarter of 2018, European investors deployed EUR4.4 billion
        across 571 deals, which is on pace to match last year's decade-high in
        capital invested (EUR18.3 billion).
    --  Despite the sustained level of capital invested, deal count slid for the
        fifth consecutive quarter - down 49% from 1Q 2017. The stark decline in
        deal count was most evident in the angel/seed stage due to intensifying
        competition and higher investor expectations.
    --  The shift toward fewer, more mature companies securing larger
        investments early on has increased check sizes in subsequent financing
        stages. In the angel & seed stage, median deal sizes more than doubled
        from 2014 (2.9x increase), reaching EUR981,000 in 1Q 2018. Meanwhile,
        median deal size for late stage financings increased to EUR8.1 million,
        a 62% increase.

Exits 

    --  Europe's VC exit market continued to be sluggish in 1Q 2018, with EUR1.5
        billion in disclosed exit value across 64 reported deals.
    --  Larger deal sizes in late-stage VC have enabled companies to extend cash
        runways and reduce the sense of urgency to exit.
    --  Two deals in the software and pharmaceutical sector made up 73% of total
        capital exited underscoring the sustained strength of the exit ecosystem
        for the sectors. The deals included the EUR905 million acquisition a of
        Preston Therapeutics and IPO of Integrated Financial Arrangements, which
        raised EUR201 million in their public debut at a EUR735 million
        post-valuation.

Fundraising 

    --  European venture investors closed 18 vehicles totaling EUR2.1B in
        commitments in the first quarter of 2018 - on pace to just fall short of
        2017 fundraising levels. Median fund size reached a decade-high (EUR86
        million) as VCs adapt to writing larger check sizes.
    --  2018 is already pacing to eclipse 2017 in the number of funds raised
        between EUR250 million - EUR500 million. Three funds have closed in 1Q
        2018 within this echelon, including Eight Road Ventures Europe's EUR303
        million vehicle.
    --  The uptick in larger vehicles came at the expense of micro-funds
        (vehicles smaller than EUR50 million). At the peak in 1Q 2015, VCs
        raised 19 micro-funds, yet only four micro-funds closed so far in 2018.
        The shortage of capital available for smaller investments may create an
        industry imbalance.

Additional coverage in this report includes:

    --  Key Takeaways
    --  Overview
    --  Spotlight: Life Sciences
    --  Corporate VC
    --  Regional Spotlight: Germany
    --  Exits
    --  Fundraising

Download the full report here.

About PitchBook
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape--including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves nearly 15,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

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SOURCE PitchBook