Recent data from Pitchbook has revealed that European venture capital (VC) valuations continue to gain traction, ending last year with a record-breaking VC quarter that indicates that 2022 could be an even bigger year for the region’s startup ecosystem.
The third quarter (Q3) report shows that at the angel and seed round, startups received record investment in Q3 2021 as more capital has entered the earlier stages of the VC lifecycle. Per the report, the average angel and seed pre-money valuation stood at €3.8 million during that period, a 22.5% increase from the record set in 2020.
Read more: The 100 Unicorns Born in EMEA in 2021
One area that stood out is the software sector, where late-stage pre-money valuations hit €27.2 million in Q3, nearly double the record figure logged in 2020.
“Previously, the U.S. was viewed as the main exporter of innovative software and large tech companies,” the report stated. “However, with late-stage capital pouring into larger European software companies, we are seeing a number of companies emerge strongly in subsectors such as FinTech, mobility, business productivity and cybersecurity.”
The U.K. and Ireland remained the main VC hub of Europe despite Brexit, and investment in their firms was also above 2020’s numbers across all financial stages, hinting that their VC ecosystems are managing the post-Brexit era well.
Another country cited in the report is France, where VC investment in French startups have doubled in the past year alone, from €5.1 billion to over €10 billion in 2021. The combined enterprise value of French startups founded since 2000 has already increased significantly, up 17.7x since 2010 to reach €179 billion in 2021.
Learn more: VC Investment in French Startups Doubles in 2021 to Hit $11.3B Despite Funding Gap Between Regions
In December, French startup Lydia closed off the country’s Q3 VC investment deals in style after a $100 million Series C round pushed it into unicorn status.
Read more: French Super App Lydia Raises $100M, Valued at $1B
Founded in 2013, the mobile financial services platform is the second-most downloaded FinTech app in France, and from a peer-to-peer (P2P) payments app like Venmo, it has expanded to include other offerings such as loans and savings accounts, and more recently cryptocurrency trading for its 5.5 million customers.
Read also: Lydia App Users Can Now Trade Crypto Assets on Bitpanda
The firm is targeting 10 million European customers by 2025 and aims to become a financial “super app” for millennials and Gen Z customers, like China’s WeChat and U.K.’s Revolut.
And kicking off France’s 2022 VC deals is French human resources (HR) startup PayFit, which announced on Thursday (Jan. 6) that it has raised a new €254 million ($289 million) Series E round, hitting a post-money valuation of €1.82 billion ($2.1 billion).
Founded in 2015 in France, the firm has expanded into three major European markets – Germany, Spain, and the United Kingdom – serving over 6,000 clients across the region. Prior to this funding round, the firm had secured €179 million since inception, including a €90 million Series D funding round which closed in March of last year.
We are also likely to see more VC deals with nontraditional investors – including PE firms, hedge funds, pension funds and sovereign wealth funds (SWFs) – rise in both value and volume this year.
According to the report, these investors have become more and more exposed to the VC ecosystem in recent years, and “the abundance of nontraditional capital entering VC rounds has been one of the key drivers of maturation within European VC in the past five years.”
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