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Robust VC investment in Europe with VC spikes in the Nordics

Venture capital investment in Europe reached a new record high in Q3’20, helped by i.a. mega-deals continuing to close in Germany and (mega-deals) propping up VC invested in the Nordic region. A handful of the top financings globally helped propel the Nordic region´s aggregate deal value to a new record. 

However, over the past 6 months a significant amount of uncertainty due to COVID-19 reflected on business valuations, especially on those businesses unable to predict future demand. VC investors focused on protecting their existing portfolios, that led to even more cautious valuations end even more challenges for early-stage companies working to raise funding. 

Venture financing in Europe, Q3'20

Globally, capital is cheap, interest rates are low, and there is a lot of VC and PE money out there looking for investments. Maybe investors are more cautious, but the money is there. Sectors that will be most relevant will be food delivery, mobility, software, biotech, and anything to do with remote workforces. As economies are expected to tighten restrictions again, we will also likely see more investments around virtual banking and all types of financial software

Jonathan Lavender
Global Head of KPMG Private Enterprise

Graph of Venture Pulse Nordics

A diverse range of sectors attracted large transactions in Europe, including fintech, drug discovery, automotive, entertainment, and health diagnostics. In the Nordic region VC investment rose in Q3’20 led by few huge deals by Klarna, Northvolt, HMD Global and Oatly. Gaming and new tech sectors have been strong sectors of investment in Nordics, other sectors and beginning to mature and gain more investment. We see cloud-based B2B solutions as one of the growing area.

During the past 12 months we have seen across Europe reluctance for IPO exits, but now a window of opportunities might be opening. Number of companies announced their IPO plans in Q3’20. Should these companies hold successful IPO exits in the near future, other mature startups in Europe feeling exit pressure from their investors could follow in their wake.

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, there are growing concerns over the hard Brexit as of December 31, 2020.