The Q3 2024 European Venture Report provides an insightful and data-driven overview of Europe’s venture capital landscape amidst a continuously evolving market. Despite the turbulence in global economies, the venture scene in Europe is seeing both challenges and areas of resilience, particularly in sectors such as artificial intelligence (AI), life sciences, and cleantech. Here’s a breakdown of the key highlights and takeaways from the report.
Deal Activity: Resilience in AI and Venture Growth
One of the standout observations of Q3 2024 is the continued growth and activity in AI and venture growth investments. AI, unsurprisingly, leads the way with over €10.3 billion in investments year-to-date (YTD), reflecting a 24% increase compared to the previous year. Notably, three of the top 10 largest deals in Q3 were AI-related, with the largest involving Helsing (€450 million), a player in AI and machine learning. Other major deals came from gaming (Voodoo) and space tech (Isar Aerospace), showing that Europe’s investment verticals remain diverse.
Venture growth investments also held strong, accounting for over €7.6 billion, representing consistent activity compared to last year. In contrast, early-stage investments such as pre-seed and seed funding showed a decline, particularly in cleantech, where deal value dropped by 27.7% year-on-year (YoY).
Top 10 VC deals by deal value in Q3 2024
Venture Debt: A Growing Financing Alternative
As equity markets become more cautious, venture debt has emerged as a more attractive option for high-growth companies seeking cheaper capital. Venture debt financing has already hit €13.2 billion YTD, matching the full-year total for 2023. Companies, particularly in fintech and cleantech, are turning to venture debt, with Northvolt being a prominent user, amassing over €7 billion in debt. However, this strategy is not without risks. Northvolt recently announced a 20% workforce reduction due to internal cost pressures, demonstrating that even companies with substantial debt financing are vulnerable to economic challenges.
Top 10 venture debt deals by deal value (2014-2024)
Exit Markets: A Much-Needed Recovery
Exit markets in Europe saw a welcome recovery in 2024. YTD exit value is at €26.2 billion, a significant increase from last year, driven largely by the Puig IPO (€12.7 billion). Even without Puig, European exit value is poised to grow by 6.6% YoY, signaling broader market recovery.
Acquisitions and buyouts continue to dominate the exit landscape, but there are also signs of life in public listings, particularly in healthcare and AI verticals. For instance, EyeBio’s acquisition by Merck (€2.8 billion) and Rezolve AI’s reverse merger (€1.6 billion) reflect strong activity in healthtech and AI exits. Life sciences, in particular, doubled its exit value from last year to €5.6 billion, showcasing the sector’s resilience amid market uncertainties.
Share of VC exit value by type
Fundraising: Strong Performance from the UK
Venture capital fundraising remained resilient throughout 2024, with €17.6 billion raised YTD. The UK led the way, accounting for 41.8% of total capital raised in Europe, with London being home to five of the top six largest fund closes. Notably, early-stage funds made a comeback, with the median fund size increasing to €83.7 million YTD.
However, while experienced firms dominated fundraising, emerging managers found it harder to attract large capital flows, with first-time fund raises down by 30.8%. The report predicts that European fundraising will continue its upward trajectory, supported by improving exit markets and secondary strategies.
Top 10 closed VC funds by fund value YTD
Key Takeaways and Conclusion:
The Q3 2024 European Venture Report highlights an ecosystem that is not without its challenges, but one that shows remarkable resilience in key sectors such as AI, life sciences, and venture growth. Cleantech and fintech, while slower to recover, still offer promising opportunities, especially with government support and strategic acquisitions driving growth.
The significant increase in venture debt usage, combined with the slow but steady recovery in exit markets, suggests that European companies are finding innovative ways to finance growth while navigating economic uncertainty. Looking ahead, as interest rates fall and markets stabilize, Europe’s venture capital scene may continue to evolve with a focus on sustainability, technological innovation, and strategic exits.
