European VC Funding Drops To Lowest Quarter In 4 Years, Despite Uptick For German Startups 

Enterprise funding to European startups reached $10 billion in Q3 2024 — the bottom quarter for the reason that third quarter of 2020, Crunchbase knowledge exhibits.

Startup funding to the continent fell dramatically: 36% quarter over quarter and 39% 12 months over 12 months. And of the three largest international locations for startup funding in Europe, Germany was the one one to indicate a quarter-over-quarter and year-over-year enhance.

Whereas Europe’s Q3 funding decline is important, it’s value noting that enterprise funding for the reason that begin of the present VC downturn has fluctuated — between $12 billion at its lowest previous to this quarter, and near $17 billion at its highest. Funding might nicely choose up once more within the fourth quarter.

In Q3, late-stage funding fell essentially the most — by greater than 50% 12 months over 12 months. There was additionally a pullback at seed, by 18% 12 months over 12 months. Early-stage funding to European startups declined 12% 12 months over 12 months.

Desk of Contents

Main international locations

Funding for startups within the U.Okay., the main nation for enterprise funding in Europe, fell 43% 12 months over 12 months to $3.2 billion, Crunchbase knowledge exhibits.

Funding to Germany-based startups grew by greater than a 3rd to $2.4 billion final quarter, making the nation the second-largest nation for enterprise funding in Europe in Q3.

France, which is extra typically the second-largest startup market in Europe, slowed to $1.4 billion invested final quarter.

“Europe is mostly a grouping of many smaller markets,” Teddie Wardi, a managing director at Insight Partners in New York who was beforehand at European funds Atomico and Dawn Capital, mentioned in an interview. Outdoors of the continent, corporations have a tendency to consider Europe as one massive area, when in reality traders have to strategy Europe market by market, he mentioned.

European late-stage slowed

Late-stage funding to European startups within the third quarter reached $4.2 billion throughout greater than 70 rounds, Crunchbase knowledge exhibits. Which means late-stage funding was down 57% 12 months over 12 months.

Notable late-stage fundings went to:

Early-stage funding

Early-stage funding to European startups final quarter reached $4.5 billion throughout simply over 290 funding rounds. These embody:

• Paris-based atomic vitality firm Newcleo raised a $151 million Sequence A;
• ESG compliance service firm Osapiens, primarily based in Mannheim, Germany, raised a $120 million Sequence B funding led by Goldman Sachs Alternatives; and
• Munich-based Marvel Fusion, a laser fusion vitality firm, raised a $70 million Sequence B led by HV Capital.

Three well being tech corporations additionally raised massive early-stage rounds:

Seed pullback?

European seed-stage funding reached $1.5 billion throughout 800 rounds final quarter. That’s down from $1.8 billion in Q3 2023.

Nonetheless, it’s too early to say definitively if there’s a funding slowdown at this stage, as seed rounds sometimes proceed to be added to the Crunchbase dataset after the quarter closes.

A rising aggressive market

Previous to 2020, European quarterly startup funding peaked at $11 billion. Whereas funding is the bottom now we have seen in 4 years, funding to European startups in 2024 thus far remains to be nicely above pre-pandemic funding.

Regardless of the slower funding atmosphere, “markets are extra aggressive than ever,” mentioned Wardi, noting he has seen European startups increase fairly shortly into different European international locations in addition to to the U.S.

Startups want to maneuver shortly, in any other case another person might take that chance, he mentioned.

In software program, European startups compete on a world stage. “In most classes of software program, it’s tougher and tougher to construct native winners because it’s actually a world market,” Wardi mentioned. “Prospects have very comparable wants wherever on the planet, and so they don’t actually care that a lot about the place the software program they purchase comes from, so long as it’s finest in school.”

Crunchbase Professional listing

Methodology

The information contained on this report comes immediately from Crunchbase, and relies on reported knowledge. Knowledge reported is as of Oct. 2, 2024.

Observe that knowledge lags are most pronounced on the earliest levels of enterprise exercise, with seed funding quantities rising considerably after the tip of 1 / 4/12 months.

Please notice that each one funding values are given in U.S. {dollars} until in any other case famous. Crunchbase converts foreign currency echange to U.S. {dollars} on the prevailing spot fee from the date funding rounds, acquisitions, IPOs and different monetary occasions are reported. Even when these occasions had been added to Crunchbase lengthy after the occasion was introduced, international foreign money transactions are transformed on the historic spot value.

Glossary of funding phrases

We have now made a change to how we embody company funding rounds in our reporting as of January 2023. Company rounds are solely included if an organization has raised an fairness funding at seed by means of a enterprise collection funding spherical.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase additionally consists of enterprise rounds of unknown collection, fairness crowdfunding and convertible notes at $3 million (USD or as-converted USD equal) or much less.

Early-stage consists of Sequence A and Sequence B rounds, in addition to different spherical varieties. Crunchbase consists of enterprise rounds of unknown collection, company enterprise and different rounds above $3 million, and people lower than or equal to $15 million.

Late-stage consists of Sequence C, Sequence D, Sequence E and later-lettered enterprise rounds following the “Sequence [Letter]” naming conference. Additionally included are enterprise rounds of unknown collection, company enterprise and different rounds above $15 million.

Expertise progress is a private-equity spherical raised by an organization that has beforehand raised a “enterprise” spherical. (So mainly, any spherical from the beforehand outlined levels.)

Illustration: Dom Guzman