EUVC Newsletter 05.05.24 | Field guide for founders, an exit mirage and some US echoes
Join us as we digest the week's news in European VC π°
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This advanced fund modelling session focuses on creating an assumptions sheet for a VC fund model. We'll explore three key areas (Core Assumptions, Asset Development, and Equity Valuation Dynamics) to demonstrate their impact on fund performance.
βYou'll receive an assumption sheet template one week prior, and the session will focus on examining how assumptions affect fund performance, tailored to the information you provide upon registration.
π Virtual | π Thursday, May 16 | π°οΈ 11:00 AM - 1:00 PM CET | β¬ 200
Highlights
π U.S. VC Fundraising Plummets: Venture capital fundraising in the U.S. has reached its lowest point since 2015, totaling just $9.3 billion in Q1 2024. Emerging U.S. VC managers are struggling, prompting them to turn to European LPs for funding opportunities.
π European Attraction: As U.S. VCs face homegrown funding challenges, European LPs are becoming an increasingly popular alternative, showing a 12.2% increase in commitments to these funds this year. Europeβs lesser VC exposure and fewer investment restrictions make it an attractive funding landscape.
π European Cities Shine: In the European VC ecosystem, cities like London, Berlin, and Paris continue to dominate. London leads with substantial capital raised and deal counts, reflecting its central role in Europe's VC market.
π€ Robotics Rising: Investment in European robotics startups remains robust, with notable rounds for companies like RobCo and 1X, demonstrating a strong investor focus on automation and AI capabilities across industries.
π± Cleantech Surge: The European cleantech sector sees a record β¬6.8 billion investment in Q1 2024, with major rounds like H2 Green Steel's deal highlighting a trend towards sustainable solutions.
π Quantum Leap: The quantum sensing market attracts significant investment due to its potential to revolutionize industries with high precision technologies, despite facing challenges in commercial scalability and market adoption.
π Crypto Rebound: With the SEC's recent approval of Bitcoin ETFs and a surge in Bitcoin's value, thereβs renewed interest in cryptocurrency-focused VC funds, which have already raised more money in early 2024 than in all of 2023.
π Infosec Focus Shifts: As generalist VCs retreat, specialist infosec investors are increasingly leading the market, capitalising on specific cybersecurity trends and securing significant exits despite a broader market contraction.
We're determined to create a community for investors tapping into the vast potential of Europe. LP investments underpin our approach, offering access to European tech at scale.
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π Curated investment opportunities, including access-constrained deals.
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Todayβs Shoutout: not a startup
But a kick ass book helping founders deciphers the secrets to raising capital from investors
"The Fundraising Field Guide" by Carlos Espinal is an essential resource designed specifically for early-stage, high-growth tech startup founders embarking on the fundraising journey. This guide aims to demystify the complex process of raising capital, offering practical advice on various facets of the fundraising cycle.
The book begins by laying a foundational understanding of the fundraising landscape, tailored to the needs of tech startup founders. One of the significant additions to the second edition is the comprehensive treatment of both the soft and hard challenges encountered during fundraising.
βThe book charts the massive changes in the fundraising landscape post-pandemic along practical guidance on how to weatherproof your startup for any financial climate and how to determine the right plan - and partner - for your fundraising journey. β
by Carlos Espinal
This guide is an indispensable resource for startup founders, enriched with practical advice and updated strategies. Its comprehensive coverage of the challenges and strategies in fundraising makes it a valuable tool for any entrepreneur looking to navigate this complex landscape effectively.
Thanks for launching this updated version of the guide Carlos π
βShow me the exit!β: Waiting for Godot or the Next IPO Wave?
Based on PitchBook data
This piece was actually prompted - unbeknownst to him - by Joe Schorge from Isomer Capital, who threw a challenging question to a panel I was moderating last week, featuring some of the most dynamic GPs in the European venture scene. It's always a tough spot when the question comes from the OG of European venture.
As we delve into the current state of the IPO market, it's clear that while everyone is asking "When are exits coming?" the answers remain as elusive as ever. The landscape in 2024 seems more akin to peering through a keyhole - a glimpse of possibility but no open door in sight. ποΈπ
The European IPO market is currently experiencing what could be better described as an "IPO vent" rather than an "IPO window." This means we're seeing just a trickle of companies managing to squeeze through to public listings, rather than a floodgate of opportunities opening up.
Despite the backlog of potential IPOs reaching its peak at the end of 2023, the pipeline is clogged.
Numerous companies are lined up, ready to spring into the public markets, particularly in high-growth sectors like biotech, pharma, and fintech, with a significant concentration in the UK. π¬π§π However, the market conditions are not yet ripe for the burst of activity that many are hoping for.
So, as we wait for these handles to turn, one can't help but feel a bit like we're in a Beckett play, waiting for an event that's perpetually on the horizon. Let's hope, for the market's sake, that the curtain rises sooner rather than later. ππ
Europe Shifts from US Dependencies? Likely not.
But imitation is the sincerest form of flattery... until it stifles your growth. π§
The tides are showing signs of a monumental shift, particularly within the US where the once relentless growth of VC firms is now hitting a plateau. The largest US venture capital firms saw a staggering 77% increase in investor ranks from 2017 to 2022, but this growth has slowed to a mere 2% over the past year, according to data analyzed by PitchBook and Live Data Technologies. This deceleration is coupled with a rising turnover, suggesting an industry at a crossroads, grappling with structural challenges and a subdued fundraising environment. These shifts not only reveal vulnerabilities but also offer a rich tableau for Europe to reconsider its venture strategy.
Perhaps it's time for the continent to veer off the American course and forge its own path.
Europe has long looked to the US as a beacon of venture capital prowess, with its bold bets and monumental returns shaping what many see as the venture capital playbook. However, the current American slowdown offers Europe a unique opportunity to introspect and innovate beyond this traditional paradigm. As US firms struggle with fundraising - highlighted by the lowest number of VC vehicles closed since 2015 - and an imbalance in their portfolios exacerbated by a public market downturn, European VCs could capitalise on this moment to strengthen a more localised and sustainable ecosystem.
The US marketβs maturity means its lessons are invaluable, yet its strategies may not always transplant effectively across the Atlantic. European markets, characterised by lower startup valuations and a conservative exposure to venture capital, present a different set of dynamics.
For instance, the median early-stage pre-money valuation in Europe stood at approximately β¬5.5 million in 2023, starkly lower than the USβs $38.2 million.
Yet, itβs not all about diverging from the US path. Thereβs a critical lesson that shouldnβt be ignored: the power of bold bets governed by the power law of venture returns.
While Europe paves its distinct venture capital road, it must also remain vigilant. As U.S. firms increasingly eye European capital to offset their domestic fundraising woes, European investors find themselves in a position of power. They are courted more than ever, which could shift the dynamics in favor of European interests, potentially allowing them to dictate more favorable terms and focus on regional growth-centric investments.
ποΈ The VC Conferences You Canβt Miss
There are some events that just have to be on the calendar. Hereβs our list, hit us up if youβre going, weβd love to meet!
0100 Conference CEE 2024 | π 14 - 16 May | π Prague, Czech Republic
SuperVenture | π 4 - 6 June | π Berlin, Germany
Nordic LP Forum & TechBBQ | π September | π Copenhagen, Denmark
North Star & GITEX Global | π 14 - 18 Oct | π Dubai, UAE
GITEX Europe 2025 | π 23 - 25 May 2025 | π Berlin, Germany
Anything else youβd like me to cover on the newsletter? π