Early-stage rounds continue to dominate investments in Europe's startup market, and on Tuesday one of the region's biggest companies announced a new fund to strengthen that trend. Accel has raised $650 million to support startups from seed to Series A across the UK, continent and Israel. The fund is Axel's eighth of its kind since it first set down roots in London in 2000.
Accel has invested in over 200 startups in the region to date, making it one of the most prolific VC firms in the market.
One of the recurring laments in Europe is that even though the region produces great talent and ideas, companies on the continent face challenges when it comes to scaling up. But there have been many exceptions over the years that have tested that claim, and part of Accel's importance as an investor comes from the fact that it has sponsored many of them. These include some of Europe's most successful startups, such as Supercell and Spotify (incidentally, two Nordic startups were born in Finland and Sweden, respectively).
Since these investments, Accel has become confident that the growth of European startups is strong enough that the capital it is raising to support them is even greater. Notably, the $650 million announced on Tuesday is the same size as the company's early-stage fund in the US (to be announced in December 2023). Given that the US is a fairly large market in terms of overall venture funding and number of startups, it speaks to Axel's confidence in what's happening here.
“Europe's technology scene is really coming of age,” said Harry Nellis, a longtime partner at Accel in London. Current investments include cybersecurity companies Cyera and Oasis, care home market Lottie, and his much talked-about AI video startup Synthesia.
As expected from this list and recent headlines, the focus going forward will be on timely companies that capitalize on the needs and interests of the day. That includes companies building creative solutions to pressing problems (cybersecurity is a prime example), smart commerce solutions (including marketplaces that leverage social and social needs), and— Need to write? — AI, AI, AI.
Venture investing in the first quarter of this year showed some positive signs of recovery, according to PitchBook research. In the first three months of this year, a total of around €16.3 billion was pumped into startups across Europe. This amount is up in the first quarter of 2023, when €13.7 billion was deposited into startups' bank accounts, but billions more than in 2021 and 2022, both of which were internet-crazed periods. The dollar is also decreasing.
Image credit: PitchBook
This decline may not be such a bad thing in the long run. The market is currently trying to avoid being swept away by a wave of startups that were lavishly funded at skyrocketing valuations over the past few years, only to find themselves crashing. It struggles to meet revenue projections and improve its valuation, and is unable to exit the public markets or raise additional capital.
Updated to remove Skype from the list of startups (Accel has no investment in it).