Enterprise investments in Europe lagged final yr, though financial shiny spots and an increase in exits present hope for 2025.
The full sum of money invested into European companies by enterprise capital (VC) companies fell final yr, in line with an annual report from PitchBook.
The worth of particular person offers grew, though the whole variety of offers fell from 11,408 to 9,600 within the yr, leading to a decrease general degree of funding.
The temper final yr was nonetheless one in all “cautious optimism”, instructed PitchBook, because it appeared that market circumstances had been beginning to enhance.
GDP progress within the eurozone remained lacklustre, though the ECB delivered 4 rate of interest cuts final yr – a response to slowing inflation.
An additional reducing of borrowing prices is predicted in 2025, though GDP progress is about to be modest.
Within the UK, in the meantime, the Financial institution of England eased fiscal circumstances by reducing its key fee twice final yr.
Synthetic intelligence increase
By way of deal worth, UK-based AI agency GreenScale secured the most important win within the last quarter and the entire of 2024, closing an funding price round €1.198 billion.
AI companies Poolside and Lighthouse, based mostly in France and the UK respectively, arrived in second and third place within the final quarter. They sealed offers price €450 million and €344.7m.
“It was of little shock that six of the highest 10 offers in Europe in 2024 had been from AI corporations”, famous PitchBook.
“The rise of AI isn’t one thing seen because the rise of the web, with the entire expertise business hyperfocused on one class.”
The UK is dwelling to the most important variety of VC corporations catering to AI initiatives – with France and Germany trailing behind.
AI funding within the continent sat at €14.6bn in 2024, representing 1 / 4 of European deal worth.
Thursday’s report additionally highlighted the expansion of verticals comparable to life sciences, oncology, mobility tech, and foodtech.
12 months-on-year deal worth in cleantech and fintech declined 26.5% and 19.8% respectively, though each verticals had been nonetheless among the many high 5 sectors with the best complete deal worth for the yr.
Fundraising in Europe
By way of the sum of money going into European VC funds, capital raised in 2024 did not change a lot year-on-year, coming in at €20.5bn.
In line with PitchBook, this complete was supported by a rise in massive funds, though the quantity of particular person closes decreased.
The median fund measurement in Europe was recorded at €71.3m, an all-time excessive.
Prime fundraising closes included the UK’s Index Ventures Progress VII fund at €1.4bn, adopted by the Netherland’s Forbion Ventures Fund VII at €890m.
By way of complete capital raised, the UK got here out on high of the fundraising leaderboard – adopted by France and the DACH area (Germany, Austria, and Switzerland).
Southern Europe additionally grew its share with massive fundraising closes seen in Spain.
Looking forward to 2025, PitchBook forecasted that capital raised will stay lacklustre, as megafunds that raised in 2024 are unlikely to take action once more within the close to future.
Optimism round exits
On a extra constructive word, analysts famous that “2024 was the yr of the exit comeback” as traders offered stakes in corporations both by means of IPOs (inventory market listings) or acquisitions.
That may be a constructive signal for the market as the flexibility to dump investments boosts confidence and affords extra funding alternatives.
Whereas a couple of exits could possibly be seen on the finish of 2023, these gross sales had been made at diminished costs.
The second and third quarters of 2024 confirmed a rise in momentum, supported by IPOs from Spanish agency Puig and the UK’s EyeBio.
The rise of enterprise debt
Enterprise debt was a significant pattern seen in 2024, mentioned PitchBook, with annual deal worth rising 27.3% year-on-year to €17.2bn.
Enterprise debt includes corporations taking up loans to finance operations – with out giving up a lot fairness within the firm.
A VC deal, alternatively, normally includes cash being exchanged for shares within the agency.
In contrast with earlier years, enterprise debt was utilized by a better proportion of enterprise progress stage corporations – which means extra mature corporations.
PitchBook predicted a extra muted outlook for this sort of funding in 2025, though enterprise debt is prone to stay necessary.
“The important thing driver of our view is the anticipated absence of the massive megadeals seen in 2024, as these corporations are unlikely to return again to the cap desk in a yr”, mentioned the group.