Venture capital deal value in Europe amounted to €43.6bn in the first nine months of 2023, a decrease of 49.1% compared to the first nine months of 2022, said data and research firm Pitchbook in a report dedicated to venture capital, published on 19 October. But activity seems to have undergone “structural growth on a longer term horizon,” with activity similar to that of years excluding 2021/2022, which saw “hyped levels of activity.” Given the unclear macroeconomic situation in Europe, Pitchbook is waiting to see if this recovery is really sustained.
That being said, “Deal activity in Luxembourg appears to be lagging wider Europe. In the first nine months of 2023, deal value in the country amounted to €152.2m, 77.5% lower than the same period in the previous year,” noted Navina Rajan, senior analyst, EMEA private capital at Pitchbook.
“This is lower than Europe as a whole, where the same was 49.1% lower, showing a less severe decline versus last year. Quarterly trends so far this year also show little evidence of recovery, with Q3 deal value declining versus Q2 2023. This is contrary to Europe as a whole, where recovery in deal value has shown more signs of promise, sequentially increasing since Q1 2023.”
Here are a few takeaways from the report.
Europe deal activity down but has seen “structural growth”
Even though venture capital deal value is down 49.1% during the first nine months of 2023 compared to the same time period 2022, “the picture isn’t totally bleak,” the firm stated. Before 2020, deal value was around similar, or even lower levels, when compared to 2023 so far. This shows that venture activity has undergone “structural growth” in the long term.
France and Benelux showed the most resilience in terms of deal activity. The region has picked up some share from other regions and now makes up 23.2% of deal value in Europe. However, it still lags behind the UK and Ireland (which took 33.0% of deal value in Europe through Q3 2023).
Luxembourg deals: value, count, sector
In Luxembourg, venture capital deal activity so far this year amounted to €152.2m, down 77.5% compared to the first nine months of 2022 (€677.7m).
In terms of deal counts, Luxembourg seen 20 VC deals in the first nine months of 2023--13 in Q1, four in Q2 and three in Q3.
The software sector has made up more than half (13 out of 20) of Luxembourg’s deal count in 2023 so far. In second place is commercial products and services (four deals), followed by consumer goods & services (one deal) and other sectors (two deals).
“By region, France and Benelux and DACH [Germany, Austria, Switzerland] have gained the most share of capital raised through Q3 2023 in comparison with 2022,” said Pitchbook. The France and Benelux region made up 27.8% of Europe VC funds raised, just behind the UK and Ireland (29.7%).
Pitchbook noted that the strong gain in share of capital in the France and Benelux region was helped by large closes in the Netherlands, such as Nato’s Innovation Fund’s €1bn close and Forbion Ventures Fund VI’s €750m close.
A closer look at cleantech
The cleantech sector seems to be showing more resilience than the overall market, according to the firm, with €9.1bn of deals so far this year. That means deal value through Q3 2023 is at 57.2% (compared to 40% for the total European VC market).
Though the market is still young and “it may take a while until the return on such technologies comes to fruition,” five out of the 10 largest deals in Q3 2023 were cleantech deals. The second-largest deal, for instance, consisted of a €1.5bn investment into Sweden’s H2 Green Steel.
Find Pitchbook’s European Venture Report Q3 2023 here.