Pitchbook’s , published on 20 July 2023, has found that macroeconomic headwinds have “caught up” with the venture capital ecosystem, leading to a drop in European VC dealmaking. Deal value in the first half of 2023 is at €25.6bn, down 60.8% compared to H1 2022 and 34.2% lower than in H2 2022.
This decline is linked to a shift in the macro environment--higher interest rates, high inflation, a closed IPO exit window and tough fundraising conditions, said Pitchbook. VC activity in Luxembourg has also declined, with deal value reaching €94.8m for H1 2023.
“VC deal activity in Luxembourg remains muted so far this year, but sequentially showed some rebound in Q2. H1 2023 deal value of €94.8bn in the country appears to be pacing lower than last year’s level at a greater extent than declines in the wider Benelux region and Europe as a whole,” said Navina Rajan, senior analyst, EMEA private capital at Pitchbook.
“However, sequentially trends appear more resilient, where in Luxembourg Q2 2023 deal value increased to €70.3m from €24.5m in Q1 driven by larger deals such as SustainCERT’s €34m round and Salonkee’s €28m deal in June. It remains to therefore be seen if such an uptick activity can be sustained through the second half of the year, where overall YoY we still expect a large decrease in deal value in the market.”
Here are a few takeaways from the report and some insights related to Luxembourg.
€94.8m in deal value in Luxembourg in H1
VC deal value in Luxembourg specifically amounted to €94.8m during the first half of 2023. This is a drop from previous years, when the grand duchy saw a deal value of €723.2m during all of 2022 and €1.206bn in 2021.
Overall VC deal value in Europe during the first six months of 2023 reached €25.6bn, compared to €104.1bn for all of 2022 and €109.3bn for all of 2021.
Looking at deal value quarter by quarter…
Despite the decline compared to 2022 figures, Luxembourg’s deal value did increase from €24.5m in Q1 2023 to €70.3m in Q2 2023, noted Pitchbook analyst Rajan, thanks in part to larger deals.
The top five Luxembourg VC deals by deal size in the first half of 2023 were SustainCERT (deal size of €34.25m), Salonkee (€28m), TaDaweb (€15m), and Emma (business/productivity software, deal size of €5.64m).
Deal value in Europe overall has not experienced a rebound on the same scale, on the other hand. Deal values in the first two quarters of 2023 were nearly at the same level--€13.3bn in Q1 and €12.3bn in Q2.
Luxembourg deal count at 15 for H1 2023
As of 19 July 2023, the deal count in Luxembourg stood at 15 for the first half of the year--12 in the first quarter and three in the second quarter.
Deal activity in Europe overall peaked in the first quarter of 2022 (with 3,899 deals in total in Q1 2022) and has experienced a quarterly decline since then, dropping to 1,821 in the second quarter of 2023. In its report, Pitchbook added that its data indicates a trend towards larger deals, partly due to the “subdued dealmaking environment.”
Pitchbook’s report also noted that the software sector has seen a significant decline in deal value, dropping 71.8% year-on-year in Q2 2023, which is more than any other sector, though the recent boom in artificial intelligence could potentially lead to more dealmaking in the future. The biotechnology and pharmaceutical sectors, which are “less cyclical,” have seen more resilience.
Find the full Pitchbook Q2 2023 European Venture Report .