In 2024, European startups are facing significant delays between funding rounds, reflecting a more cautious venture capital environment. The median time between rounds has increased across most series, particularly for later-stage companies. Startups seeking Series C funding, for instance, are now experiencing a median gap of two years between rounds, compared to 1.6 years in 2023. For Series D and beyond, the wait has extended to 2.3 years, up from 1.8 years last year.
Economic Conditions and the Shift in Venture Capital Dynamics
This shift marks a significant departure from the post-pandemic venture capital “gold rush,” when investors were more eager to fund startups at a rapid pace. In 2022, however, economic uncertainty led to a significant pullback, resulting in fewer deals and longer intervals between funding rounds. The slowdown has forced startups to adopt new strategies, such as aggressive cost-cutting, to extend their operational runway rather than seeking immediate funding.
Moreover, many companies have delayed raising funds, hoping for better market conditions and higher valuations. This wait may be justified, as the first half of 2024 has shown an increase in “pre-money” valuations, suggesting that the market may be slowly rebounding.
Larger Funding Rounds Provide Some Relief
While the time between rounds has lengthened, the size of the funding rounds has grown, offering startups more runway and reducing the pressure to seek new capital quickly. Early-stage venture capital rounds, for example, have increased from €1.2 million in 2023 to €1.8 million in 2024. This trend of larger rounds is observed across various funding stages, allowing startups to secure more capital upfront and reduce their dependency on frequent fundraising cycles.
This dynamic has provided a cushion for many companies, enabling them to focus on growth and operational efficiency without the immediate need for additional funding.
Notable Exceptions: Mistral AI and Wayve
Despite the overall slowdown, certain sectors and startups continue to defy the trend. Mistral AI, a French startup specializing in generative artificial intelligence, successfully raised €600 million in a Series B round just six months after securing €385 million in Series A funding. Similarly, Wayve, a London-based company focused on autonomous driving technology, raised $1.05 billion in its Series C round in less than a year. These outliers highlight the sustained interest from investors in cutting-edge technologies like AI and autonomous vehicles, where the potential for innovation and returns remains high.
Outlook for 2024: Signs of Recovery
Although the overall dealmaking numbers for 2024 suggest the year may fall short of 2023, there are signs of a recovery on the horizon. According to PitchBook, deal value in Q2 2024 increased by 24.4% compared to the previous quarter, and by 9.3% compared to Q2 2023. This uptick indicates that investors may be regaining confidence, and the venture capital market could be poised for a resurgence in the coming quarters.
As European startups continue to navigate the complexities of a more conservative investment environment, these signs of recovery are encouraging. Sectors such as artificial intelligence, autonomous driving, and other high-growth areas are likely to lead the charge in attracting renewed venture capital interest.
Conclusion
European startups are facing longer delays between funding rounds, driven by economic uncertainty and a more cautious venture capital environment. However, these challenges are somewhat offset by the larger round sizes, which provide companies with more runway and reduce the frequency of fundraising. Sectors like AI and autonomous technology continue to attract substantial investor interest, suggesting that opportunities for growth remain strong despite the overall slowdown. As market conditions improve, the latter half of 2024 could see a resurgence in dealmaking activity, providing a more favorable environment for startups across the continent.
