Resurrected after the global financial crisis, the venture capital market in Europe is luring institutional investors back from the sidelines.
The pace of European venture capital dealmaking has been accelerating since 2016, fueled by the surge in unicorns, primarily fast-growing technology firms that have achieved $1 billion-plus valuations. Last year, there were 61 such unicorns, up from 44 in 2017, according to London-based venture capital firm Atomico. Data by Preqin showed that 2018 was a record year for venture capital fundraising in Europe, with $22.9 billion flowing into venture capital funds, up 24% from $18.4 billion in 2017 and $13.1 billion in 2016. Deals are up as well, to a record 2,938 in 2018, up 7% from 2,741 in 2017 and 2,658 in 2016.
Of course, those record amounts pale in comparison to the amounts raised by U.S. venture capital funds, some $132.1 billion in 2018, according to a report recently issued by PitchBook and the National Venture Capital Association. Last year, there were 1,853 deals completed in U.S., the report noted.
Still, successful exits of European ventures in 2018, including Swedish audio streaming platform Spotify Technology SA, which listed directly on the New York Stock Exchange, have helped foster interest in the asset class as well as lay the groundwork for further growth as established entrepreneurs turn their attention to launching new startups across the continent. With companies now being originated in most major European cities, beyond the traditional hot spots of London or Paris, investors are finding that access to venture capital investments also is improving, industry experts said.
In another development advancing the market, the European Union's venture capital platform launched in April last year. Dubbed VentureEU, the pan-European fund-of-funds program was seeded with €410 million ($460 million) and aims to raise up to €2.1 billion in public and private investment to support local startups.
"The extent of opportunity in European VC has grown substantially," said Carolina Espinal, managing director at private equity manager HarbourVest Partners LLC in London, adding that "the breadth of opportunity is materially different than 20 years ago."