Europe-Based Venture Capital: Increasing Deal Value – June 2015

by Anthony Leung

  • 18 Jun 2015
  • PE
  • VC

The public stock markets within several Western European countries have been rocked by the ongoing economic crisis in Greece. In spite of this, venture capital activity on the continent has appeared to show healthy signs as of late. At the time of writing, 2015 has seen 591 Europe-based companies receive venture capital financing, totalling €4.8bn. When compared with previous years, deal flow is not particularly remarkable given that between 2012 and 2014 the number of financings had consistently exceeded 1,600. It is too early to speculate, however, whether this year will continue that trend, but it is interesting to note that 2015 YTD’s figure of €4.8bn is already greater than the full year amounts seen in the period 2007 to 2011, and is certain to exceed the €4.9bn seen in 2012, despite it only being June.

Two of the five largest venture capital funding rounds since 2007 have been raised this year. They are the $526mn Series G round for Spotify that was supported by TeliaSonera, Goldman Sachs and a host of venture capitalists; as well as Rocket Internet’s $560mn investment in the online food ordering marketplace, Delivery Hero. As the chart above shows, the UK is the leader in terms of total funding raised in Europe, but this year Sweden and Germany, the respective headquarters for the above portfolio companies, continue to hold a strong position in European venture capital. Deals made in Germany this year represent 27% of all Europe-based deals in terms of value, compared to just 18% last year. Although this metric is subject to change throughout the remainder of the year, Preqin’s Venture Deals Analyst shows that funding for Germany-based companies has been rising, having received €1.3bn so far this year, up from €1.2bn in 2014 and €0.7bn in 2013.

As is to be expected, the most prominent industry classifications for companies based in Europe that have received venture capital investment in 2015 are the internet, healthcare, software and telecoms sectors, with the same trend also witnessed in North America and Greater China. Since 2007, there has been a gradual decline in the healthcare industry’s stake in venture capital financings in terms of aggregate deal size. In 2009, healthcare made up 37% of the total aggregate venture capital deal value in Europe, but has since seen year-on-year decreases, and now accounts for only 15%. However, in this case, the reason behind the drop in proportion lies primarily due to the faster growth rate and successes of other industries. The European internet industry in 2015, for instance, is already at its highest level in terms of aggregate deal value for the period 2007 to present, standing at €2.3bn, representing a 20% increase from 2014. 

With a record €19.2bn in dry powder currently available for Europe-focused venture capital investments, the remainder of the year looks set for a continued flow of deal activity.

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