VC investment in Europe remained robust in Q3’21 however fell short of record total investment experienced the prior quarter.
Fintech continues to attract large VC investments across Europe
Fintech continued to be a very hot area of investment across much of Europe in Q3’21, accounting for several of Europe’s largest raises of the quarter, including an $800 million raise by UK-based Revolut, a $553 million raise by Switzerland-based Quantus Holdings Strategies, a $413 million raise by UK-based MarketFinance, a $300 million raise by UK-based Rapyd, a $225 million rise by Switzerland-based TradePlus24, and a $224 million raise by Germany-based Solarisbank.
These large funding rounds reflect the growing maturity of fintech companies in Europe and their need to grow and deliver economies of scale in order to compete against traditional banks and insurance companies. In Q3’21, Solarisbank used funding raised to acquire Contis – a payments-focused fintech in the UK. Over the next few quarters, the sector will likely see additional M&A activity.
VC investment in Germany remains solid, led by $950 million debt raise by Grover
VC investment in Germany held strong in Q3’21, led by a $950 million raise by on-demand grocery company Grover, and $100 million+ raises by a range of companies including content platform company Contentful, space technology firm Isar Aerospace, edtech CoachHub, and green energy company Enpal. The broad-ranging focus could reflect VC investors turning some of their attention from sectors where market leaders have now emerged to sectors expected to see future growth.
M&A activity in Germany was significant in Q3’21 and is well-situated to grow further heading into Q4’21, particularly in the healthtech space. While SPAC IPOs declined in popularity in many jurisdictions this quarter, Germany saw its first SPAC merger completed in Q3’21 – between Lakestar SPAC I LRS1.DE and travel company HomeToGo.
Nordics see three new unicorns created in Q3’21
The Nordics region continued to attract robust interest from VC investors, although total investment dropped from the high seen in Q2’21. While Sweden often attracts the largest VC deals in the region, companies in Norway and Denmark seized the limelight in Q3’21; in Denmark, digital challenger bank Lunar raised $250 million and SMB expense management platform Pleo raised $150 million, while in Norway, e-commerce to print and delivery platform Gelato raised $250 million. All three companies earned unicorn status as a result.
Fintech and SaaS were the big winners in terms of VC investment in Q3’21, although investor interest in gaming and ESG-related solutions also remained strong. Looking ahead, the future looks bright for the VC market in the Nordics region, with fundraising already well ahead of 2020 results with one quarter left in the year.
Ireland continues to see interest in health and biotech
VC investment remained strong in Ireland in Q3’21, in spite of a seasonal lull given the pace of fundraising activity. International investors and corporates continued to see immense value in the country both in terms of innovative companies and innovation capacity. In Q3’21, Stripe announced it would create hundreds of engineering jobs in Ireland over the next three years14. Heading into Q4’21, fintech and health and biotech are expected to remain the hottest areas of investment in Ireland.
Trends to watch for in Europe
Given the significant number of grocery and last mile delivery companies that are springing up in Europe, the space could soon become saturated. This could soon lead to rapid industry consolidation as companies look to grow and gain market share. The fintech sector could also start to see major consolidation over the next few quarters.
With COP26 being held in Glasgow in Q4’21, sustainable solutions, greentech, and climatetech are expected to remain high on the radar of VC investors in Europe. During Q4’21, sectors that were not prioritized during the pandemic could also see renewed investments.
There are more and more new actors entering the UK market, so it’s not just that there’s a lot of dry powder floating around, but there’s also more competition with hedge funds, corporates, and other less traditional investors. We’re also seeing more foreign investors participating in fundraising for UK-based companies. All of that is ultimately driving up valuations here.
Investment remains strong in Europe — with over $27.5 billion invested on 1910 deals
First time venture financings surpass $6 billion in 2021, far surpassing 2020 totals
Venture-backed exit activity surpasses $112 billion YTD
UK and France continue to see new heights
Top 10 deals spread among 6 countries