The last 6 months in venture
Earlier in March we published our European Built World Funding Report. Here’s the sequel, again analysing data from Crunchbase.
There were 5,421 transactions, with close to 30b deployed (debt and private equity take up the remaining $270b).
Looking at the 10 countries with the most funding, we see the UK in first place. The UK also has the most transactions (by a comfortable margin), with France coming second in that respect. Germany is a comfortable third, for total volume and number of transactions.
Moving away from all transactions, and focusing on early venture rounds only, we see something similar. The UK, France and Germany retain their top 3 positions, but the UK has more early venture transactions than France and Germany combined. However, the median round for France and Germany is much bigger than that of the UK.
A common question is the average round size. Looking at the median round sizes, we see:
- Pre-Seed: €370k
- Seed: €2.0m
- Series A: €11.5m
- Series B: €29.8m
Seed and Series A rounds haven’t changed since the last time we did this analysis, but Pre-Seed’s and B’s have seen a significant increase. Huge outlier rounds are still a thing. The outliers for Pre-Seed, Seed and Series A include a 112m Seed, and a $214m Series A. The first two are AI deals, and the latter is hydrogen taxis. AI is no surprise, but hydrogen is. Could this be the next peak in the hype cycle?
The hype cycle is an interesting thing. Our way of unpicking it is to look at the proportion of funding which goes to each sector at Early and Late rounds, and then picking those sectors which have the most proportional change. This sounds more complex than it is, but our analysis suggests that blockchain, biotech and pharma are overweighted at early rounds. Are early stage VC’s over-indexing on these sectors?
But let’s move away from the hype, and focus on the built environment and real assets. There was a total of $7b of venture funding in this space. This is great news for us - 22% of European venturing funding focused on real assets. I expect this share to grow over time, especially as more and more money flows into the energy transition, the housing crisis, and the labour shortage. The largest round in this space was the aforementioned outlier hydrogen deal, HysetCo, which raised €200m for its hydrogen taxi concept. Looking at the largest Pre-Seed, Seed and Series A rounds in this space, we see that the green transition generally is the biggest sector. But, the approach to the green transition is not uniform. France’s biggest built environment early deal is Hyset, whereas Germany’s biggest Series A in real assets is Cylib, looking at battery recycling. The UK has a different approach entirely, looking at EV chargers.
We can see the different approaches by looking at the total funding by sector. The largest sector is renewable energy, but we see some interesting (and unexpected) sectors in the top 20, including robotics, construction, logistics and industrials.
So what are the takeaways?
Firstly, European venture is healthy. Deals are being done, and getting slightly bigger. Secondly, now is the right time to build something in the real assets space. Thirdly, the green transition dominates, but there’s still room outside of this space. The UK has been the pre-seed champion for the past half year, so if you’re a seed investor reading this, you’ll know where to look for deals. It’s positive news for founders too - especially those in the built environment.
I’m optimistic, and looking forward to seeing how this changes for the rest of 2024.