6 reasons why 2021 was a stellar year for venture capital in Europe
Pitchbook.com’s 2021 Annual European Venture Report showcases how the ongoing pandemic has continued to drive investors into tech businesses in Europe and Israel in 2021, resulting in an unprecedented level of VC activity.
The report delves further into this data, highlighting important trends in dealmaking, geography, exits, and fundraising, among other areas. Here’s a look at the ecosystems of Europe and Israel in 2021 according to the Pitchbook Venture Capital Report 2021.
1. For the first time, capital invested exceeds €100 billion
Last year, European and Israeli entrepreneurs raised €102.9 billion (about $116.4 billion), up over 120 percent from 2020. Despite the ongoing uncertainty caused by the epidemic, the number of transactions set a new high with an estimated 10,583 transactions.
2. The United Kingdom continues to dominate Europe’s venture capital industry
Despite a gradual reduction over the preceding four years following the Brexit vote, the UK and Ireland accounted for the majority of capital spent, with a minor increase in their percentage of the continent’s total funding. DACH and France & Benelux remained the second and third largest European VC regions, respectively, despite the latter’s percentage of Europe and Israel’s overall capital invested falling.
3. Larger circles eat a larger portion of the pie
In 2021, the European ecosystem saw a surge in large rounds and new unicorns, owing to a rise in late-stage fundraising, which now represents 70% of total deal value. According to the Pitchbook Venture Capital report 2021, despite the fact that early stage rounds accounted for a smaller percentage of total funding, first-time financings in fact grew in size.
4. The number of non-traditional investors is increasing
The European Venture Capital report shows that venture capital is diversifying. Last year, the value of VC deals with involvement from unconventional investors, such as mutual funds, PE investors, and sovereign wealth funds, reached a new high of €78.4 billion. When compared to other asset classes, VC provided better pandemic resilience and high-growth prospects, prompting investors at top venture capital firms to seek additional exposure.
5. Exit value is dominated by public listings
Last year, founders and investment capitalists hurried to exit at an unrelenting rate, with an amazing €142.5 billion in exit value — more than quadruple the previous record set in 2018. With high-profile listings from Wise, Deliveroo, and Auto1 Group, IPOs accounted for the majority of the value.
6. Venture capital funding is a mixed bag
Only 2017 surpassed 2016 as the most capital raised for VC funds in a calendar year. Larger venture fund sizes have resulted from strong return profiles and growing demand for technology VC investments. However, as the number of venture funds fell to its lowest level since 2013, more capital is concentrated in fewer hands.