Europe’s VC Deals Pick Up In Q2 of 2024

Recovery in valuations of companies has helped in increased activity in Europe’s venture capital (VC) deals and further improvement is expected throughout the year as interest rates are set to decrease, a new report said.

The report entitled “Q2 2024 European Venture Report,” which sponsored by J P Morgan and released by PitchBook, said that larger transactions have been gaining share, and out of the top 10 largest deals in Q2, a significant proportion were domiciled in the UK and were from artificial intelligence (AI) companies. It is of little surprise that the vertical attracted $6.86 billion in deal value in H1 of 2024, pacing above last year.

The deal value during the second quarter specifically doubled quarter over quarter (Q-O-Q) to $4.57 billion. AI & machine learning (ML) has thus become the second-most-active vertical in Europe so far this year, behind software as a service (SaaS) but ahead of cleantech.

Whilst investment in the AI start-up system continues to grow in Europe, adequate infrastructure and regulatory frameworks will be key deciding factors and the first step was initiated by European Union (EU) in May this year when it approved the EU AI Act, the first major legislation for AI globally.

With the asset class having grown significantly in Europe over the past five years, growth during 2024 has been the highest on record, with the year-to-date (y-t-d) venture debt value of $19.17 billion which was higher than $13.72 billion in 2023.

“There have been 153 venture debt deals in Europe so far in 2024 and 65.4% fall in the more mature areas of the market, with 34% of them in venture growth,” the report said.

It may be recalled that PitchBook noted in its 2024 France Private Capital Breakdown, which was published in Q1, that there has been resilience within France deal activity driven in part by the country’s skew towards AI. However, France’s AI & ML deal value, deal volume, and company count still lag those of the UK.

UK Tops

The UK has the highest number of VC-backed AI & ML companies with 1,319 start-ups, more than twice that of France, which has the second-highest number at 520, followed by Israel, the report said.

Israel has the highest proportion with one-third of its VC-backed companies in AI & ML. It is followed by Luxembourg, Estonia, and Romania. In Western European VC ecosystems, AI & ML companies represent 10% to 15% of company counts.

Apart from AI, political developments in France in the past month have been front and centre of financial markets.

Exits in Europe in Q2 were buoyed by the listing of luxury player Puig. Excluding this listing, the market showed little sign of recovery. So far in 2024, 85.6% of VC-backed exit value has come from acquisitions, the highest proportion that acquisitions have held in the past 10 years.

Overall, within the top exits, there were public listings including cleantech robotics firm RanMarine Technology in the Netherlands and Swedish fintech company GreenMerc.

The few initial public offerings (IPOs) that trickled through in Q2 indicated a warm-up of IPOs within Europe, providing proof points for public market sentiment towards new listings. However, the most meaningful IPOs in Europe have mostly been Private Equity (PE) backed, and the landscape remains mixed.

As of H1, capital raised has reached $10.24 billion, leaving a $13.39 billion gap to fill in H2 for fundraising to stay flat y-o-y. The current top 20 open VC funds already amounted to $16.99 billion and could technically close the gap, the report added.