European VC deal value down 61% in first half of 2023, report finds

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European VC deal value down 61% in first half of 2023, report finds

Venture capital funding in Europe is plummeting as investors shift focus from growth to cutting costs.

In the first half of 2023, European VC deal value was 61% lower than at the same time last year according to a new report by Pitchbook, a financial data firm.

The total capital raised in the continent was €8.9 billion. At the current rate, the full year is on track to pace 37% below 2022 levels.

Analysts blame the decline on surging interest rates, high inflation, fundraising hurdles, and a subdued IPO market.

These economic headwinds have prompted new investment strategies. Instead of prioritising growth at all costs, VCs are increasingly working with their startups to restructure operations and extend runways as far as possible.

A gloomy impact of this prudence is mass layoffs and hiring freezes at startups. British unicorn GoCardless, for instance,  is cutting 15% of its global workforce as of June 2023.  According to Pitchbook, startups with lower growth rates that need funding to survive are likely to face down rounds and valuation cuts. More companies are also likely to seek capital despite lower valuations.

This recently occurred at Getir, the Turkish food delivery app. In April, the company raised €435.5m from Abu Dhabi state fund Mubadala at a valuation of €5.7bn. Just a year earlier, the same investor had injected €690.7m into Getir at a valuation of €9.9bn. The new funding effectively slashed the startup’s value by 42.4%.

Source: PitchBook • Geography: Europe *As of June 30, 2023