European venture capital trends and dealmaking in H1 Q2 2022
Although capital deployment in Europe remains robust, a myriad of challenges, including record inflation and weaker economic growth, threaten to slow activity.
Take a look at five charts from our Q2 2022 European Venture Report highlighting the key trends that marked Europe’s venture ecosystem in H1 2022.
Europe saw €54.4 billion (about $55.53 billion) invested across 6,033 deals in the first half of the year, representing year-over-year growth of 3.7% and 1.1%, respectively.
High levels of dry powder and long-term investment themes continued to drive dealmaking, but as the year progresses with a recession looking to be more likely, dealmaking could flatten.
Late-stage deals accounted for the largest chunk of VC capital with €36.1 billion—66.4% of the aggregate total. An influx of foreign and nontraditional investors has pushed up round sizes and valuations. But as interest rates rise, it likely will be harder for late-stage companies to grow at the same rate they did during last year’s peak.
Nontraditional investor participation in European VC deals has dipped slightly from the pace set in 2021. A total of 1,921 deals worth €42.4 billion included investors such as corporate VC arms, private equity firms, hedge funds, investment banks and pension funds.
Public listings suffered most from a more cautious attitude toward exits, as tech sell-offs occurred across the globe. In H1 2022, 34 public listings generated €11.3 billion as opposed to 110 worth €41 billion in the same period last year.
Overall, European exit value fell back to pre-2021 levels in H1, while exit count remained healthy with 657 deals completed, worth a total of €25.8 billion.
European VC fund count is on track to reach its lowest figure since 2013 with 98 vehicles closed in the first half of the year. On the other hand, fund value registered only slightly below last year’s halfway mark: €12.3 billion was raised in H1 2022, compared with €24.8 billion in 2021.
Fund sizes continue to trend upward as both strong historical return profiles and VC’s more insulated nature from short-term volatility have enticed LPs to commit. As the year progresses, fundraising is likely to become tougher, particularly for emerging managers.
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