Heading into the global recession brought about by the highly contagious coronavirus, most investors were likely concerned about where valuations would head over the duration of the shutdown and subsequent reopening.
Interestingly, in the case of European venture capital (VC), the answer is up, up, and more up.
If there are perhaps two words to describe how the coronavirus has affected venture, the two words might be “amazingly odd” or “unexpectedly strong”. A look follows.
Early-stage European VC Pre-Money Valuations
First, a look at the early-stage VC pre-money valuations in Europe. Fascinatingly, pre-money valuations exploded, for all four reported measures (the average, the median, the 25th percentile, and the 75th percentile). Amazingly, the average pre-money VC valuation reached almost €35 million as of June 30, 2020.
Early-stage VC Deal Sizes
The rosy picture painted by valuations also shows up in deal sizes, as shown below. The average and 75th percentile deal size surpassed €7 million in 2020, a sign that the European private markets are in healthy shape.
Late-stage VC Pre-Money Valuations and Deal Sizes
Like the early-stage picture, the late-stage VC pre-money valuations were bright.
For late-stage VC pre-money valuations, the average reached almost €180 million, while the 75th percentile grew to over €40 million and the median stood at around €10 million.
On the deal size, the late-stage VC deals continued expanding, with the average growing to almost €20 million, while the 75th percentile reached about €16 million and the median surpassed €4 million.
A Sector Look
When looking at the figures by sector, the picture is even brighter for some sectors.
Valuations for software companies continued to move towards the cloud in the first half of 2020. For late-stage VC, the median valuation was €22.1 million, while the median valuation for early-stage VC reached €13.3 million and angel & seed stage valuations equaled €4.5 million.
For pharmaceutical and biotechnology companies, the median deal size for late-stage VC reached an amazing €9.5 million, while early-stage VC valuations equaled approximately €5.3 million and angel and seed stage VC valuations dropped slightly to €1.1 million.
The Non-Traditional Investor
One other view of the European VC picture is the median deal size with nontraditional investor participation. Fascinatingly, late-stage VC with nontraditional investors ballooned to €9.0 million in the first half of 2020, while early-stage VC with nontraditional investors reached €3.7 million and angel and seed stage deals cooled off a little to €1.3 million for deals involving nontraditional investors.
Summing Up
Overall, in contrast to what many thought would happen to venture capital and private equity valuations heading into the global pandemic, valuations actually zoomed up further through the period. Demand for private investments did not disappear with people sitting at home. Who would have thought?
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