附近上门

European venture funding halved in the second quarter of 2023 compared to a year earlier, and was down two-thirds from the peak two years ago, data shows.

Funding totaled $12.4 billion in Europe in Q2 2023 鈥� flat quarter over quarter and down 50% from the $24.7 billion invested in Q2 2022.

The quarterly decline is in line with the funding reset in North America, where funding halved year over year for the past quarter, but Europe鈥檚 startup ecosystem is younger 鈥� and arguably more vulnerable.

鈥淚 think we are more sensitive to a downturn,鈥� said of Berlin-based investor , speaking on the state of European venture investment. Valler noted that Germany only became a viable startup ecosystem around 2008. 鈥淚f there is a persistent downturn and sources of funding dry out, this can have an effect for decades afterwards.鈥�

Around 18% of global venture capital was invested in Europe-based startups in the second quarter, according to an analysis of 附近上门 data. The U.K. maintained its lead as the largest market for venture capital. Germany was not too far behind, and France ranked as the third-largest funding environment.

AI investment

European AI companies raised $1.5 billion in Q2 2023, representing 12% of the continent鈥檚 funding.

Large rounds were raised by AI applications development platform , intelligence platform for banking and insurance , and AI-powered video platform 鈥� all London-based companies. Heidelberg-based , which helps government and private enterprise implement AI technologies, also raised significant funding.

Late-stage

Late-stage funding has declined each quarter since the second quarter of 2022.

That funding stage saw the largest decline when compared to earlier funding stages in the past quarter, falling 64% year over year as global-leading late-stage investors dialed back on leading private company financings.

Early stage

Early-stage funding declined by a third compared to the same time frame a year ago. Funding has settled around the $5 million mark for the past four quarters with funding up quarter over quarter at $5.9 billion.

Seed stage

Seed-stage funding was flat quarter over quarter, just shy of $2 billion down from $2.8 billion in Q2 2022.

While not as strong as it was in 2021, 鈥渢he seed market is still really vibrant鈥� with a large volume of dollars invested, said of , a London-based early-stage investment firm.

A few newer funds have been launched in recent years, he noted, and Hoxton is seeing competitive deals at the seed stage, with startups often receiving multiple terms sheets from investors.

Active investors

The role of governments has been critical in Europe, said Valler. Public-private funds have remained active through the downturn with Bonn, Paris-based , Germany-based and Brussels-based being among the more active investors through H1 2023.

The most active seed fund investors in the first half of 2023 included , , and .

Lead investors at Series A and B in the first half of the year were Bpifrance and London鈥檚 . The majority of active investors have cut back on the number of rounds led for the first half when compared to H1 2022.

All eyes on Arm

There is one potentially large bright spot for the European tech scene on the horizon: British chip designer last week filed plans to go public in what could be one of the largest tech offerings of all time.

If it’s successful, Arm owner , also headquartered in the U.K., could get significant liquidity that could in turn bode well for future investment into growth-stage companies.

Methodology

The data contained in this report comes directly from 附近上门, and is based on reported data. Data reported is as of Aug. 23, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. 附近上门 converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to 附近上门 long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

We have made a change to how we include corporate funding rounds in our reporting as of January 2023. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.

Seed and angel consists of seed, pre-seed and angel rounds. 附近上门 also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. 附近上门 includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the 鈥淪eries [Letter]鈥� naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a 鈥渧enture鈥� round. (So basically, any round from the previously defined stages.)

Illustration: