Venture capital investments in European startups exceeded $52 billion last year, reflecting the outsize peaks between 2021 and 2022 (driven primarily by the Covid-19 pandemic), and the market's long-term growth trajectory and gradual stabilization following the slump in 2023, according to a new report.
Although political and regulatory disruptions have been seen in 2024, the European talent pool continues to rise even as the European talent pool, which has covered 2024, according to a new “Trade Flow” report from the world law firm Orrick.
Last year, an analysis of over 375 VC and growth equity investments in Europe revealed a small number of key points. Compared to the past few years, the European startup market has been stable, with a slight rebalancing of investment terms compared to the pandemic hype and extreme highs and lows of post-pandemic slowdown.
There was also more adoption in the European trade of the UK Venture Capital Association's new model form document. With this de facto standard emerging, this trend could accelerate future trading as it is much easier for everyone to push trades that are well-structured.
It also appeared that European companies were expanding their options pool. This focuses on scaling companies rather than early selling, with over 70% of stock funds, including top-up, highlighting a stronger European talent pool.
There were also signs of improvements in trading volume and scale. Orrick is an average size with investor clients, an increase of 66%, and transactions launched by startups saw a slight decline despite the company's transactions still representing a majority.
However, the report reflects the fact that Europe is constrained by the number and volume of funding transactions in the growth stage. Europe is suitable for the early stages, but funding for the late and growth stages is lacking.
Stock-based transactions were stronger than debt-based transactions, and companies preferred extension rounds over debt rounds. The two most common stock-based transactions that appear in this instance are ASAS (advanced subscription agreements) and SAFE (simple agreements for future stocks).
Approximately 30% of rounds were either standalone secondary finance or rounds, including secondary components. Founders tend to access secondary transactions early in the fundraising phase, some of which are Series A.
Startups with some sort of SaaS or platform-based business model accounted for 21% of funding, increasing to 23% of Deep Tech, AI and ML (machine learning) components traded with a 33% share, while FinTech rose to 16% of European trading.