European Q3 venture trends in five charts

On Nov 3, 2022

Market conditions finally caught up with European venture capital investments in the third quarter of the year, as VC firms adopted a more cautious attitude to investing—though fundraising remained robust.

Here’s a look at five key trends from our Q3 2022 European Venture Report that highlight how the continent’s VC ecosystem is navigating choppier waters.

Europe saw an estimated 9,027 deals worth a total €76 billion in the first three quarters of the year, but activity slowed significantly in Q3.

Deal value fell 36.1% quarter-over-quarter to reach €18.4 billion, the lowest level recorded since Q4 2020. At its current pace, deal value could surpass the €100 billion-mark for the second year in a row, but volume is unlikely to match last year’s record numbers as securing capital becomes increasingly challenging.

Late-stage deals still account for the majority of capital raised this year, but the stage’s overall share of deal value has declined slightly from 2021.

The increasing threat of down rounds have led late-stage companies to explore other funding avenues, while earlier stages remain more insulated from the downturn.

Relatively undaunted by current market corrections, nontraditional investors have not shied away from VC investments. The group—which includes corporate VCs, hedge funds and pension funds—participated in 2,874 deals worth a total €58.9 billion through Q3.

Acquisitions and buyouts remain the preferred exit routes, helped by the fact that, for the first time in years, their valuations are higher than those of public listings.

Overall, Europe could see its second-best year for exit count, with 728 deals completed through the end of September. Exit value on the other hand is down 76% year-over-year, standing at €33.6 billion.

Capital raised for European VC funds is on track to land above last year’s figures, with €19.7 billion amassed across 145 vehicles.

Plummeting fund count likely indicates that LPs are focused on committing to well-established VCs with strong track records. With the markets moving toward a recession, investors are becoming more risk averse when it comes to backing first-time funds.