Early-stage dominance: Insights from PitchBook’s Q1 2024 European Venture report

While the first quarter of 2024 showed a mixed tone, with robust deal activity indicating a potential increase in deal value compared to 2023, exits demonstrated weakness, and fundraising displayed some resilience, reveals the new "Q1 2024 European Venture Report" published by PitchBook.

Although it's too early in the year to determine if these trends will persist, there is cautious optimism regarding deal activity and fundraising, while exit markets are expected to remain restrained.

VC deal activity

According to the report, in Q1 2024 the total deal value increased 19.1 per cent year-over-year, reaching a total value of €16.3 billion. On the other side, the deal count decreased in Q1, compared both to the previous quarter and year which might indicate a shift towards quality within the market, thus having less transactions but with valuations that are more resilient.

In Q1 2024, the deal value from mega-rounds (deals valued at €100 million or more) remained robust, reaching €8.2 billion across 18 transactions, nearly half the total mega-round value seen in 2023.

In Europe overall, early-stage deals accounted for the majority of both deal volume and value in the first quarter, backed by sizable transactions like the one that had H2 Green Steel, Monzo and Mistral AI in Q1 2024.

Share of VC deal by region

In the first quarter of 2024, although the UK retained a significant portion of the deal count in Europe, its share of deal value decreased to 17.3 per cent. Meanwhile, regions like the Nordics and France & Benelux saw an increase in deal value, showcasing resilience year-over-year.

In France & Benelux, this resilience was supported by the deals within robust sectors like AI, fintech, and cleantech (which in 2023 got a notable chance for growth due to structural demand supported by regulation). Consequently, these sectors, along with the region itself, hosted some of the top transactions in Q1, including investments in companies like Mistral AI, Picnic, and Electra.

VC deal activity for female-founded companies

Deal activity for female-founded companies had a weaker start compared to the previous year, with a deal value of €1.9 billion which makes a decrease of 28.6 per cent year-over-year. The female-founded share of European deal value slightly declined to 21.8 per cent in the quarter. All-female-founded companies represented only 4.1 per cent of deal value in Q1 2024.

While all-female-founded deals tend to be smaller in size, female-founded exits appeared more buoyant, with €1.3 billion in exit value in Q1 (which is half of the 2023 full-year level). Despite the growth in female-led industries like femtech, there remains a significant disparity between female-founded activity and the wider ecosystem, suggesting potential for growth in female-founded companies.

VC exit activity

In the first quarter of 2024, exit activity showed little improvement from 2023, with most exits being acquisitions and European public listings remaining inactive. The current exit activity suggests a potential 46.4 per cent decrease year-over-year if the trend continues.

IPO activity in 2024 has been divided, with private equity-backed companies showing more resilience than venture capital-backed ones. Profitability remains a key focus for public equities in Europe, contrasting with the US market's tolerance for unprofitable tech companies.

Outside of public listings, as stated, it appears that the exits taking place (acquisitions and buyouts) are being done at lower valuations.