Europe Still Loves Private Equity and Venture Capital

November 9, 2020

Contrary to what some might think, private equity and venture capital funding is still doing well across Europe in 2020. In a fascinating look, provided by private equity data provider Pitchbook and sponsored by fladgate, the view is almost too good to believe. Here’s a review of the finding.

Deal Activity

The first view of the European picture is on the venture capital deal activity. The following figure depicts deal value and deal counts across Europe from 2010 through September 30, 2020. Fascinatingly, the picture is incredibly positive.

Many prognosticators would have thought that the coronavirus pandemic would have basically shut down activity. That hasn’t happened. Instead, venture capital activity through the first three quarters is already above the entire 2018 year’s activity, which was the second highest on record – behind only 2019. At €29.5 billion, 2020 may turn out to be the highest in the past decade, if not ever. Through the first nine months of 2020, there have been 4,646 deals.

Source: Pitchbook

Type of Deals

With the broader picture quite positive, how does the breakdown look? The following is a look is a makeup of the venture capital deals by stage of investment. Interestingly, although somewhat concerning, deal activity is growing strongest in the early and late stage venture capital. The angel and seed stage activity has slowly become smaller, having declined from almost half of all investments in 2014 to just above 30% in 2020.

Source: Pitchbook

A Sector View

The sector view also provides an interesting perspective. The largest area of investment activity in 2020 so far has been in the software sector, accounting for around a third of all investment deals by euro volume. The other two sectors that account for a large portion of activity are biotechnology and pharmaceutical investments and other areas of investment. When summing these three areas, the total percentage of all investment euros going to these three sectors sums to almost 70%.

Other sectors listed in the report include media, information technology, health care services and systems, health care devices and supplies, energy, consumer goods and recreation, and commercial services.

Source: Pitchbook

Activity with U.S. Investor Participation

What about investor activity with U.S. investor participation? That picture is shown below. Overall, the relationship between U.S. investor participation and Europe activity has slowed somewhat in 2020, down to 769 deals across €16.1 billion in deal euro volume.

The all-time high for activity was in 2019 at 1,099 deals across €19.1 billion in euro deal volume.

Source: Pitchbook

Summing Up

Overall, it has been an unbelievably strong year for private equity and venture capital activity across Europe. The old adage goes that one “should never let a good crisis go to waste.” That certainly appears to be the case for private equity and venture capital investors across Europe in 2020.

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