The European startup funding landscape
Welcome to an exclusive preview of our first ever public European funding report.
Headline stats
$183 billion has been deployed across 4,921 transactions from Sep 23 to Feb 24.
The five largest transactions are:
- Axpo Group, Swiss energy company, $7.6b debt facility
- Northvolt, Swedish battery developer, $5.0b debt facility
- Automotive Cells Company, French battery developer, $4.7b debt facility
- H2 Green Steel, Swedish green steel company, $4.6b debt facility
- PSG, French football team, $4.3b private equity round
It’s a good time to be in the ClimateTech space (or football…). Let’s see if this trend applies for all deals, not just the largest:
Over 10% of financing went to energy, CleanTech and manufacturing.
If we look at the data on a per country level, the UK is by far the most active market. It’s deployed the most capital and has the most transactions.
The UK has deployed 26bn and Germany’s $19b. However, the UK has smaller transactions, with the average deal half of France and Germany’s.
Looking at the ten most active countries, we see the UK, France and Germany at the top. However Sweden and Switzerland are not far from third place, and punching well out of their weight class. Northvolt and H2 Green Steel are the drivers for Sweden. Those two transactions are more than half of Sweden’s total deployed. Estonia, Europe’s per capita unicorn hub, is also in the top ten, ahead of many more populated countries.
Average round sizes and valuations
While this has been interesting so far, a lot of these transactions aren’t venture cases. Let’s take a deeper look at venture deals generally. The first thing that comes to mind is valuations and funding rounds:
- Pre-Seed: €295k round, €2.0m pre-money
- Seed €1.9m round, €7.0m pre-money
- Series A €11.6m round, €30m pre-money
- Series B €25.5m round, €420m pre-money
- Series C+ €43.2m round, €510m pre-money
(converting USD to EUR at 1 USD = 0.92 EUR, data accurate as of 5th March)
Looking at the distribution of rounds, we see a few things:
Firstly, the dataset is full of outliers. I think this is a consequence of using Crunchbase, but doesn’t take away from the results themselves.
Secondly, we see a convergence in round sizes. High Pre-Seeds are comparable to low Seeds. Similarly, the overlaps between subsequent rounds are clear. This fits with the increasingly larger rounds we’re seeing.
The most popular venture sectors
Moving on from valuations, let’s look at where the capital is being deployed. The difference between sectoral allocation for early and late deals helps us spot trends. Early means Pre-Seed to Series A. Late is Series B onwards.
Deals linked to AI (Artificial Intelligence, Machine Learning) represent 8% of Early funding. Neither of these categories make the Top 10 for late stage rounds.
It’s no surprise that they appear for early rounds. OpenAI has led to a paradigm shift in AI and we’ve seen a boom in AI linked funding. What’s interesting is this hasn’t progressed into the late rounds yet. I suspect there’s a 6-12 month lag until AI trickles down to the late stage.
Extending this logic, we can find the sectors which had the most change between early and late rounds. Transportation, AI, and biotech are the obvious winners. The proportion of early funding they received is double the proportion of late funding they received. Compare these to battery, industrial and aerospace. These had a high proportion in later rounds, but a much smaller proportion in early. Is this a sign that the market is shifting away from hardware intensive DeepTech?
Our bread and butter
Now we’ve analysed all venture deals, we focus on PT1’s sweet spot: Pre-Seed, Seed, and Series A deals across real assets and the built environment.
Overall, $1.9b was deployed across 322 transactions. One thing the Pre-Seeds have in common: they are all heavily geared towards the green transition. Montamo and Purpose Green help residential houses decarbonise. Metris and Ensol are solar plays: for commercial and residential respectively. 4QT bucks the trend slightly, as it aims to electrify heavy industrial vehicles. At a country level, we see France and Germany dominating the Series A and Seed sectors. We also see Sweden taking the largest round, with Aira’s Series A.
But is France and Germany’s prevalence common at all stages? Surprisingly, yes.
Germany has dethroned the UK for capital deployed. The UK is still top for number of transactions, but has fallen to third when ranking by capital deployed. The top three are unchanged: Germany, France and the UK. These top three are far in the lead, with a vast gulf between them and the next cluster: Sweden, Finland, Spain, Switzerland and the Netherlands.
If we then look at the proportion of transactions between Pre-Seed, Seed and Series A deals we see that the UK and Germany have very similar profiles. I suspect this is down to their mature ecosystems. New companies are raising pre-seeds, and existing companies are getting to Series A. Not every country has this profile: many lack Pre-Seeds or Series A’s.
Moving on from country analysis, let’s look at which sectors capital is being deployed to. Focusing on the built environment only allows us to be a lot more granular.
We see renewable energy, energy and CleanTech make up over 25% of funding. If we include GreenTech, Battery, Clean Energy and Energy Storage, we get to a third of total funding. Energy is becoming the biggest part of built world funding. We’ve been saying this for a while, but now we have the numbers to show other investors agree.
Artificial Intelligence is coming through. AI and ML make up close to 4% of the funding deployed. This is less than the 5.4% of funding across all Pre-Seed to Series A rounds, but we’re not far off.
“Classic” PropTech and ConTech are dwarfed by the green transition. This is good news for early-stage investors: these areas might be undervalued.
Something that surprised me was the 1% of funding going to the Semiconductor sector. This includes companies in the industrial energy transition, like Build to Zero and StackEase. I suspect this sector will grow as we move from decarbonising housing to decarbonising industry.
Active investors
There are 236 active “Lead Investors” in this space. Many investors have elected to remain anonymous, but focusing on the ones we do know:
- Techstars is the most active, with 9 lead investments in the last 6 months in this space
- 7 investors take second place, with 3 lead investments each
- The most capital deployed is harder to assess, as Crunchbase doesn’t track the data I need. Through some back of the envelope calculations, I think Tilt Capital Partners takes it. This comes from their €46m lead investment in EODev, a French hydrogen fuel cell startup.
Takeaways
The key facts to take with you would be:
- There have been 4.9k transactions deploying $183b
- Pre-Seed, Seed and Series A built environment deals make up 1% of deployed capital ($1.9b) and 7% of transactions (322)
- The UK, Germany and France are the most active countries with healthy activity at all deal stages
- Techstars is the most active investor in this sector
- The average Pre-Seed, Seed and Series A rounds are:
- €295k round, €2.0m pre-money
- Seed €1.9m round, €7.0m pre-money
- Series A €11.6m round, €30m pre-money
This is our first time publishing this analysis. Prior to this, our analysis has always been an internal tool to put our finger on the pulse of European funding.
All data is from Crunchbase, and PT1 is responsible for all graphs and analysis.