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 Finland (Relex: $566 million), Estonia (Bolt: $710 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 . 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.
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.
The startup ecosystem in the Nordics region has grown considerably in recent quarters — with more activity and larger deals spread across Sweden, Finland, Norway, and Denmark. In Q1’22, all four jurisdictions attracted $100 million+ rounds, highlighting the growing strength of companies in the region. The current geopolitical tension could slow VC investment heading in Q2’22 as investors become more cautious, particularly about doing larger deals.
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.