We’re an impatient bunch here at TechCrunch+, so while we await tidied quarterly venture reports from major startup databases, we’re also running our own queries to get early looks at the state of the fundraising world. As it’s the last day of the first quarter, we’re too antsy to wait any longer to see what’s been going on in Europe. Let’s take an early peek.
In the wake of Techstars’ decision to leave the Swedish market, we looked at Sweden’s startup scene earlier this week following a glance at what is happening in the United States. Those were useful exercises, but we’ll need a broader dataset to really set our bearings. To that end, let’s look at all of Europe and then consider the three largest venture markets in the region: the U.K., Germany and France.
The Exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
The numbers are fascinating and can be read as either bullish or bearish. The negative take is simple: European venture totals are down from a year ago. The more positive perspective is also worth considering: When we focus our view on just the last few quarters, it appears that venture is done contracting.
Naturally, we’ll have oodles more data and charts when Q1 2023 data fully drops, but we can get a head start. Let’s talk Europe.
Inside Europe’s Q1 2023 venture results
European startups raised $28.85 billion across 2,274 deals in Q1 2023, according to preliminary PitchBook data. That’s less than in Q1 2021, but we already know (and you may be tired of hearing by now) that the 2021 venture vintage was an outlier. However, the figure also represents a year-on-year decline, which may sound like a surprise: In Q1 2022, the downturn had already started in the U.S.
This was less true in Europe. Startups reported raising steady to positive amounts of funding at the time, compared to Q4 2022, because of delayed announcements or a more complex mix of reasons. But either way, Q1 2022 was still decent on the old continent, and the decline in venture funding only became a reality in the second half of last year.
If it’s not that relevant to compare Q1 2023 to the same quarter last year, let’s look at the data from another angle and compare it to what’s been happening in the U.S. There, “total capital invested in the first quarter has continued its multiquarter decline,” we reported earlier this week.
In contrast, capital invested in European startups increased in Q1 2023 compared to the third and fourth quarters of 2022. While it is still too early to call it a rebound, it does make for an encouraging data point for Europe’s startup scene, especially when you consider that we are still missing a few days’ worth of data on the quarter that just ended. The final tally may be higher.
European startups elude global VC funding slowdown in Q1 2022
(There are likely some currency conversion issues afoot here as we’re discussing results in U.S. dollar terms only. However, many deals worldwide are priced in U.S. dollars, making foreign exchange impacts somewhat minimal in certain cases. Past that, given that the euro traded in a rather narrow range during the first quarter, we presume that currency fluctuations were not that big a deal in the last three months.)
Another consideration is that Q1 2022 data showed that not every European country was trending in the same direction. At the time, CB Insights’ State of Venture report indicated funding in the U.K. and France was on an upward trajectory, but not Germany. Is that the case again?
We’ll wait for more curated data before we make calls on a country-by-country basis, but we did want to go a bit deeper into the European scene. Let’s see if the somewhat bullish continental numbers are being driven by the three largest countries in the region, aggregated into a group.
What about the Big Three?
Most venture capital invested in Europe goes to startups in the U.K, France and Germany. This was true again in the first quarter of this year, with PitchBook already counting 1,362 deals representing a total of $24.71 billion — 85% of Europe’s venture capital volume in the period.
Considering their weight, it’s not unexpected that the Big Three reflect similar trends to Europe as a whole. Or the other way around: Any shift in these three countries would likely swing the data in the other direction. (This is why North American startup data and U.S. startup data never show divergent trends; the United States is too large a player compared to Canada and Mexico to be swayed too much by its smaller geographic buds.)
Thanks to that, venture capital volume in the U.K./Germany/France is up quarter on quarter but down year on year. Venture capital volume invested in these three countries was up 33% in Q1 2023 compared to Q4 2022, despite the fact that the data is still incomplete. But it was also down 39% from Q1 2022, with the same caveat.
European venture numbers are down from heights but no longer in free fall. We’re perhaps starting to see a new normal form, one that is more positive than we might have originally expected.
Comment