Europe’s venture capital market remained strong in the first quarter, even as the macroeconomic backdrop threatened to dampen investor appetite.
Valuations across the board continued to rise from the records set in 2021, but current uncertainty, particularly in public markets, may cause their growth to slow.
Here’s a closer look at six charts from our First Quarter European Venture Capital Valuations Report showing the trajectory of European valuations.
Early-stage pre-money valuations in the first quarter topped last year’s heights, with the median reaching €9.4 million (about $9.9 million). Public market turmoil has less of an impact on the early-stage market, allowing valuations for these younger companies to rise across all quartiles.
Volatility in public markets and rising inflation have yet to dampen pre-money valuations in the late-stage, with the median price rising 6.5% to €19.4m in the first quarter. Late-stage deal sizes have also been trending higher, but macroeconomic uncertainty could slow valuations and deals in coming quarters.
Downside rounds are on track for the lowest share of venture capital deals in the past decade. In the first quarter, only 14.9% of rounds were completed with a haircut in valuation, down slightly from last year’s figure of 15%. However, a looming economic downturn has intensified scrutiny of the sustainability of valuations, which could lead to further cuts in the future.
The growing presence of non-traditional investors in European venture capital has led to record deals and valuations. In the first quarter, the size of transactions, including non-traditional investors, grew at all stages, but the current economic environment could lead them to target less risky and defensive businesses that generate cash in their portfolios in the short term.
Some 28 new unicorns were minted in the first quarter, putting this year on track for the most $1 billion+ startups in a calendar year. Trading from the pre-existing European unicorns was strong, with the herd’s aggregate post-money valuation hitting a record €424.5bn.
European outbound activity slumped in the first quarter since the record year of 2021, but despite this, the median post-money valuation on outbound rose to €60m, up from €42.7m in the year last. However, median valuations of public listings fell, amid a sell-off in public tech shares, to €21.1m.
Read more: European Venture Capital Valuations Report Q1 2022
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