European venture capital activity saw EUR5.9 billion invested across 296 rounds during the third quarter of 2019, the strongest quarter on record according to research by Refinitiv.
During the first nine months of 2019, total venture capital investments reached EUR17.4 billion across 1,113 rounds, a 52 per cent increase by investment value compared to a year ago and higher than any annual total save for 2000, the height of the dot-com era.
Greg Beaman, Manager, Private Equity Contributions at Refinitiv, says: “Instead of returning to previous levels following a substantial start to the year, the pace of European venture investment actually increased in the third quarter, resulting in the strongest individual quarter ever recorded.
“One possible explanation for this has been the steadily increasing foreign investment over the past few years, as funds based within Europe dropped from providing an 84 per cent share of total financings a decade ago, to just 59 per cent in 2019.”
“Surpassing the current annual record of EUR18.7 billion achieved in 2000 looks to be a near certainty at this stage, with the amount invested in the first nine months of 2019 eclipsing the full 12 month totals of all other years.”
Thirty venture capital rounds over EUR100 million were completed during the first nine months of 2019, with eleven of these completed during the third quarter. Rounds that were completed during the third quarter of 2019 include: London-based online health service provider Babylon Health, which raised EUR495 million in August, and London-based SumUp, a mobile payments business that raised EUR330 million in July.
Firms headquartered within the United States invested EUR4.4 billion in European companies during the opening nine months of 2019, accounting for 27 per cent of all disclosed investment dollars. Europe domiciled funds contributed a total of EUR9.7 billion and were led by the EUR2.9 billion invested by funds located within the United Kingdom, EUR2.6 billion by France, and EUR1.0 billion by Germany.
A total of 56 European venture funds recorded closes during the first nine months of 2019, raising a combined EUR7.0 billion in commitments, an increase of 7 per cent compared to a year ago despite a flat change in the number of funds recording closes. Fundraising figures were led by firms Generation IM, Kreos Capital, Cube Infrastructure Managers, and Accel, all of which raised more than EUR500 million during the first three quarters of 2019. Funds focusing on early stage investments contributed to the bulk of the total fundraising, accounting for 56 per cent of commitments.
During the first three quarters of 2019, European venture backed exits totalled EUR6.4 billion from 76 transactions, a 41 per cent decrease in value and 25 per cent decline by number of deals compared to a year ago. By number of transactions, European venture-backed exits posted its fifth consecutive year-over-year decline from the 198 exits completed during the first nine months of 2014.
The performance of European venture capital funds continued to show outsized returns over the public markets as of Q2 2019. Published data provided by Cambridge Associates shows that European venture capital funds returned an IRR of 8.1 per cent at the end of Q2, outperforming the market by 3 percentage points and just slightly lagging behind their US venture capital counterparts, which returned 8.6 per cent.