VC investment in Europe was incredibly robust in Q1’22, led by massive rounds by Checkout.com in the UK ($1 billion) and Germany’s WeFox ($871 million). Other jurisdictions also attracted large deals, including Estonia (Bolt: $710 million), Finland (Relex: $566 million), France (Doctolib: $571 million, Qonto: $549 million, Back Market $541 million), Turkey (Getir: $768 million), Italy (Scalapay: $497 million), and Austria (GoStudent: $339 million). The geographic diversity highlights both the breadth of Europe’s innovation ecosystem and the rapid maturation of startups across the region.
ESG and climatetech well positioned to see growth in VC investment
Europe-based VC investment in ESG and climatetech surged during Q1’22, driven in part by the COP26 summit held during Q4’21. The Russia-Ukraine war also shone a spotlight on the dependence that some European countries have on gas from Russia. As a result of the crisis, Germany halted the certification process for the completed Nord Stream 2 gas line project from Russia in Q1’22 1 . The combination of geopolitical uncertainty and climate change pressures could spur additional investment in climatetech and alternative energy sources and systems. It could also increase interest in complementary startups, such as fintechs focused on energy and carbon management.
VC investment in the UK soars to new quarterly high in Q1’22
VC investment in the UK surged to a new high in Q1’22, helped by a $1 billion megadeals for Checkout.com. A major convergence of factors has helped energize the UK’s VC market, including businesses across industries embracing digitization and tech-enablement, private equity funds looking for better returns, and increasing fundraising focused on earlier stage companies in order to achieve higher returns. While interest rates are now on the rise, the significant amount of funds already raised will likely keep investment relatively steady heading into Q2’22.
Given the uncertain geopolitical and macroeconomic environment, some VC investors in the UK are feeling pressure to get deals done quickly as the window of opportunity could shut. During Q1’22, fintech was a very hot area of investment in addition to B2B focused services and healthtech, while interest in cybersecurity and defence-focused solutions grew considerably.
VC investment in Germany remains robust despite dip from Q4’21
VC investment in Germany dropped from the record high set in Q4’21, although total investment remained solid compared to historical trends. An $871 million raise by insurtech Wefox accounted for Germany’s largest deal of Q1’22, while a number of healthtech companies also attracted significant funding, including digital health platforms Patient21 ($142 million) and Ada Health ($120 million). Fundraising activity by VC firms in Germany was also very strong in Q1’22 – well ahead of the pace set in 2021. Corporates continued to show interest in the VC market, particularly players in the automotive industry looking to expand their businesses by nurturing startups.
Tailwinds from 2021 help drive VC investment in Nordics
During Q1’22, VC investment in the Nordics region was robust, driven in part by deals initiated late in 2021. A number of $100 million+ rounds helped lift VC investment, including Finland-based business productivity firm Relex ($566 million), satellite imaging company ICEYE ($135 million), and mobile phone refurbishment company Swappie ($122 million); Sweden-based Volta Trucks ($260 million); and Norway-based firm Ardoq($125 million) a company offering Enterprise architecture tools. The increasing deal count reflects the region's growing ecosystems, local strengths in early stage and thus higher number of later stage companies scaling their operations.
Despite the strength of the Nordic startup ecosystem; public market volatility, rising inflation & interest rates and concerns regarding the Ukraine crisis could cause some challenges in the later stage heading into Q2’22. While the availability of capital remains record high, the later stage VC deals driven by international investors may take more time to complete with higher level of uncertainty, enhanced focus on due diligence and valuation levels compared to 2021.
VC market in Israel stays hot as companies vie for talent
VC investment was very strong in Israel in Q1’22, with interest from both foreign VC investors and corporates. Cybersecurity continued to be a hot area of investment in Israel, with Cheq raising $150 million during the quarter. Agtech and healthtech also gained significant attention from investors, with milk bioengineering company Remilk raising $120 million, medical diagnostics company MeMed raising $93 million, and health focused data analytics company MDClone raising $63 million. Given the competition for talent in the country, mature startups are expected to increasingly focus on acquiring other companies in Israel or in Europe in order to acquire the talent they need to drive growth quickly.
Very healthy VC investment in Ireland despite declining number of deals
Q1’22 was a busy quarter for VC investment in Ireland. Despite a decline in the total number of deals, Ireland continued to see a healthy amount of VC investment, led by a $150 million raise by fintech Wayflyer and a $96 million raise by food-ordering platform Flipdish. The funding rounds earned both companies coveted unicorn status. During the quarter, JP Morgan Chase also announced plans to acquire Ireland-based share plan management technology Global Shares for $730 million – in a deal expected to close in the second half of 2022.
Trends to watch for in Q2’22
Looking ahead to Q2’22, deal activity across Europe could slow somewhat as a result of the Russia-Ukraine war, combined with rising inflation ad interest rates. While there is a significant amount of dry powder in the market, VC investors may hold-back from making investments over the near-term given the level of uncertainty. Fintech, healthtech, and alternative energy will likely remain hot areas of investment across the region during Q2’22.
Fintech continues to attract a lot of VC investment here in the UK. The payments space has continued to grow, while buy-now-pay-later (BNPL) has become incredibly hot in the eyes of investors – this also includes other businesses diversifying into offering BNPL options. The FCA has announced its intent to regulate the space in the near-future, which could drive consolidation in the space moving forward.
Investment remains strong in Europe - with over $31.7 billion invested on 2219 deals
Early-stage deals decline in value and volume
Corporate VC investment surpasses $14 billion for second time ever
First time venture financings slows to $1.5 billion on just over 500 deals
UK and France continue to see new heights
Top 10 deals spread among 6 countries