Venture capital investment in Europe reached a new record high in Q3’20, helped by new record levels of investment in Germany, Israel, and the Nordic Region. A diverse range of sectors attracted $100 million+ megadeals in Europe, including fintech, drug discovery, automotive, entertainment, and health diagnostics.

UK continues to attract large VC rounds

VC investment in the UK remained relatively strong in Q3’20, despite a significant decline in the number of deals. Fintech was a key area of investment with digital bank Revolut raising $580 million and cloud-based banking platform Thought Machine raising $125 million. London-based kitchen space startup Karma Kitchen also made news with a $314 million raise this quarter.  During the quarter, the UK government continued to focus on supporting recovery initiatives – announcing a £2 billion Kickstart scheme focused on providing young people with job placements for 6 months. The program could enable startups to find and retain talented young people.

Venture financing in Europe, Q3'20

Germany sees very robust VC investment in Q3’20

Germany attracted a significant amount of VC investment during Q3’20, led by a $632 million raise by CureVac and a $291 million raise by AUTO1 and a $246 million raise by agtech company Infarm. The size of these deals reflects a number of factors, including the maturity of Germany’s VC ecosystem and the confidence of investors in proven companies with business models that are resilient to COVID-19’s impacts.

Travel price aggregator Omio also raised Euro84M million during the quarter, bucking the downward trend affecting many travel-focused companies. In sectors hit hard by the pandemic, some VC investors are making bets on what companies will emerge as clear industry leaders. This could lead to consolidation as smaller companies struggle or fail to attract funding.

Trends to watch for in Europe

As Europe continues to adjust to a new reality, VC investors in Europe are expected to remain highly focused on areas such as health and biotech, fintech, and the future of work. Investment in edtech is also likely to grow given that it could be a critical necessity over the next few quarters.

While the pandemic has overshadowed Brexit negotiations over the past 6 months, there are growing concerns over the possibility of a hard Brexit as of December 31, 2020, making it a critical area to watch heading into Q4’20.

Quote by Kevin Smith
Europe: Global analysis of venture funding infographic in Q3'20