European Venture Investment Reaches All-Time High

SEATTLE, Jan. 18, 2019 /PRNewswire/ -- Europe's venture capital investment eclipsed EUR20 billion for the first time ever, according to PitchBook's 4Q 2018 European Venture Report. Despite the 25.9% drop in deal volume year-over-year (YoY), swelling deal sizes and increased interest from nontraditional investors helped drive deal value to the high-water mark. As an example, median early-stage deal size increased 86.9% from 2017, while late stage median deal size increased by 67.9% over the same period. Europe's exit market witnessed three multi-billion-dollar liquidity events in 2018 - Spotify, Adyen, and Farfetch - which sent exit value soaring to EUR47.4 billion. However, with 30.5% fewer exits completed than in 2017, questions arose on the exit market's ability to ensure strong capital returns to a broader group of GPs and LPs. To support the larger check sizes required by more mature startups, European VCs raised fewer, larger funds in 2018, as evidenced by 0.2% YoY increase in capital raised and a 23.5% YoY decline in fund count. For this reason, international investors, nontraditional investors, and government programs have grown in importance as alternative sources of funding for angel & seed and early stage startups.

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"Despite declines in volume across dealmaking, exit activity and fundraising, Europe's VC ecosystem did sustain healthy investment levels throughout 2018 as a result of increased investor focus on targeting fewer, more mature startups," said Cameron Stanfill, analyst at PitchBook. "An important milestone to note was the exit market's ability to support three multi-billion-dollar liquidity events in 2018, as it inspires investor confidence in their ability to sponsor companies through the later stages of growth. An area that will be watched closely in 2019 is capital availability for early stage startups, with investors raising fewer, larger funds."

Investment Activity

    --  Capital invested in 4Q 2018 reached EUR5.1 billion across 586 deals,
        bringing 2018 annual totals to EUR20.5 billion invested across 3,384
        deals - an all-time high for capital invested in the European venture
        ecosystem.
    --  European deal value was driven largely by investments completed within
        the EUR10 million to EUR25 million range. This size bucket made up 25.0%
        of total deal value and represented an 5.4% increase over last year.
    --  The DACH region secured EUR4.4 billion in investment and made up 15.8%
        of total deal count, up from 13.6% in 2017. The high concentration of
        mature startups in the region attracted VC investors, as evidenced by
        the elevated deal sizes - median late-stage deal size in Germany reached
        EUR15.0 million in 2018, compared to EUR6.7 million for all European
        late-stage rounds.
    --  Both US investor and corporate participation reached decade highs in
        terms of deal volume, making up 20.9% and 21.1% of total deals,
        respectively.

Exits

    --  Exit value reached a decade high of EUR47.4 billion in 2018, with much
        credit due to two outsized public listings, Spotify and Adyen, which
        combined drove EUR30.3 billion in exit value, or 63.9% of total capital
        exited.
    --  While exit value reached a decade high, there were only 373 completed
        liquidity events in 2018 - the lowest count since 2012.
    --  The drop in the number of exits pushed the investments-to-exits ratio
        over 9.0x. A continued uptrend in this ratio may signal a broader
        slowdown, as exits are typically affected by economic downturns sooner
        and more severely than dealmaking.

Fundraising

    --  The annual count of closed VC funds in Europe fell to the lowest level
        in the last decade, with a just 62 vehicles raised during 2018. This
        represents a 23.5% decline from 2017's fund count.
    --  In contrast, total capital raised reached EUR8.4 billion, a 0.2%
        increase from 2017 and 42.9% increase from 2014 levels. Moreover, median
        fund size reached an all-time high of EUR123.2 million, a sizable 59.3%
        increase from the previous year.
    --  Taking a closer look, 2018 saw an uptick in the count of funds raised
        within the EUR250 million to EUR500 million size range, and a
        significant drop in the count of micro-funds raised (vehicles EUR50
        million or smaller). This divergence in fundraising could present
        challenges for smaller, developing startups seeking traditional angel &
        seed or early-stage round sizes.

Additional coverage in this report includes:

    --  Overview
    --  Corporate VC
    --  Regional spotlight: DACH
    --  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 more than 22,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

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