European venture capital in 2023: Insights from PitchBook's Q3 report

The new Q3 2023 European Venture Report published by PitchBook reveals that deal value within VC markets is set to end 2023 well below 2022, but signs of recovery could be evident.

According to the report, venture capital deal value in Europe amounted to €43.6 billion in the first nine months of the year representing a decrease of 49.1 percent from the first nine months of 2022.

Even the fact that the total deal value in 2022 amounted to €109.0 billion, the predictions are that the recovery through the end of the year will not be significant enough to boost 2023’s total versus the last two years.

VC deals activity

Even though deal value prior to 2020 was almost similar or lower compared to the first three quarters of 2023, it indicates that the venture activity has undergone structural growth in the longer term. In the shorter term (quarterly), it can be noted that the deal value has been increasing since Q1. The data shows that in Q3 deal value increased by 5.9 percent compared to Q2.

The report highlighted some of the notable conclusions:

• Late stages continue to show greater declines versus early stages. Late-stage deal activity was down 61.9 percent through Q3 2023 compared with the same period in 2022.
• Early-stage deal activity has been sequentially increasing since Q1 2023 (four of the top 10 deals in Q3 fall into this stage).
• Cleantech and AI technologies were common amongst notable deals (five out of the 10 largest deals in the quarter were cleantech deals, including the three largest investments).
• Commercial services and France and Benelux show the most resilience regarding the sector and regional trends.
• However, the UK and Ireland still lead by far, where 33.2 percent of deal value in Europe sat through the first nine months of 2023.

VC exit activity

According to the report, exit value reached €9.1 billion in the first three quarters of 2023 (72.8 percent below the same period last year). Therefore, it is no surprise that 2023 is on track to be the most depressed year for exit value since 2013.

When it comes to exit types, the public listing value remains the most depressed this year (with a 79.8 percent decrease compared with the same period last year), while buyouts showed the most resilience (but still, with a 56.4 percent decrease compared to the same period last year). The majority of exit value and count remain in acquisitions.

By sector, IT hardware shows the most resilience, and energy has seen the greatest decline in the first nine months of the year. In Q3 2023, of the top 10 exits, most were in the software industry.

VC fundraising activity

In the first nine months of 2023, capital raised amounted to €13.9 billion (in comparison, 2022's total amount was €27.6 billion). Even the fact that the data shows a decrease year-over-year, there has been an uptick since H1 2023, with capital raised amounting to €8.9 billion.

As stated in the report, it is not expected that this year will exceed 2022 levels, even with the notable increase in funding over the course of the year. There are many reasons for this, including the lack of megafunds in the asset class, which can skew totals.

Regionally, the largest share of capital raised through Q3 2023 in comparison with 2022 was gained by France and Benelux (27.8 percent), followed by the DACH region (24.3 percent).

With this share, France and Benelux are closing in on the UK and Ireland — the largest region in terms of capital raised as a portion of the European total.

The entire report can be accessed here.

Lead image via PitchBook