Venture capital funding for European startups hit $10 billion in the third quarter of 2024 — the lowest quarter since the third quarter of 2020, Crunchbase data shows.
Initial funding to the continent dropped significantly: 36% quarter-on-quarter and 39% year-on-year. And of the three largest European countries for startup funding, Germany was the only one to show a quarter-on-quarter and year-on-year increase.
While the decline in funding in Europe in the third quarter is significant, it’s worth noting that venture capital since the start of the current VC downturn has fluctuated – between $12 billion at its lowest for this quarter and close to $17 billion at its highest. Funding may well pick up again in the fourth quarter.
In the third quarter, late-stage funding fell the most – by more than 50% year-on-year. There was also a decline in seed, about 18% year-on-year. Early-stage funding for European startups fell by 12% year-on-year.
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Leading countries
Funding for startups in the UK, Europe’s leading country for venture capital, fell 43% year-on-year to $3.2 billion, Crunchbase data show.
Funding for startups in Germany increased by more than a third to $2.4 billion in the last quarter, making the country the second largest country for venture capital in Europe in the third quarter.
France, often the second largest start-up market in Europe, dropped to $1.4 billion invested in the last quarter.
“Europe is really a cluster of many smaller markets,” said Teddie Wardi, managing director at Insight Partners in New York, formerly of European funds Atomico and Dawn Capital, in an interview. Outside the continent, companies tend to think of Europe as one big region, when in fact investors need to approach Europe market by market, he said.
Europe’s second stage slowed down
Late-stage funding to European startups in the third quarter totaled $4.2 billion across more than 70 rounds, Crunchbase data shows. That means late-stage funding fell by 57% year-over-year.
Notable late-stage funding went to:
Early stage funding
Early stage funding for European startups last quarter reached $4.5 billion across over 290 funding rounds. These include:
- Paris-based nuclear power company Newcleo raised a $151 million Series A;
- Mannheim, Germany-based ESG compliance services firm Osapiens raised $120 million in Series B funding led by Goldman Sachs Alternatives; and
- Munich-based Marvel Fusion, a laser fusion energy company, raised a $70 million Series B round led by HV Capital.
Three health tech companies also raised large early-stage rounds:
Seed pullback?
Early stage funding in Europe reached $1.5 billion in 800 rounds last quarter. That’s down from $1.8 billion in the third quarter of 2023.
Still, it’s too early to definitively say whether funding is possible at this stage, as seed rounds typically continue to add to the Crunchbase database after the end of the quarter.
Growing competitive market
For 2020, European quarterly startup funding peaked at $11 billion. While funding is the lowest we’ve seen in four years, funding for European startups in 2024 to date is still well above pre-pandemic funding.
Despite the slower funding environment, “markets are more competitive than ever,” Wardi said, noting that he’s seen European startups expand quite quickly into other European countries as well as the US
Startups need to move fast, or someone else might take the opportunity, he said.
In software, European start-ups compete on an international level. “In most categories of software, it’s harder and harder to build local winners because it’s really a global market,” Wardi said. “Customers have very similar needs anywhere in the world, and they really don’t care where the software they buy comes from, as long as it’s best in class.”
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Methodology
The data contained in this report comes directly from Crunchbase and is based on reported data. Data reported is as of October 2, 2024.
Note that data lag is most noticeable in the early stages of venture activity, where initial amounts increase significantly after the end of the quarter/year.
Please note that all funding values are in US dollars unless otherwise noted. Crunchbase converts foreign currencies into US dollars at the prevailing exchange rate from the date of announcement of financing rounds, acquisitions, IPOs and other financial events. Even if these events were added to Crunchbase long after the event was announced, forex transactions are converted at historical spot rates.
Glossary of financing terms
We’ve made a change to the way we include corporate funding rounds in our reporting starting in January 2023. Corporate rounds are only included if a company has raised equity seed funding through a tiered funding round.
Seed and Angel consists of seed, progenitor and angel cycles. Crunchbase also includes venture rounds of unknown classes, equity crowdfunding and convertible notes of $3 million (USD or US dollar equivalent converted) or less.
Early stage consists of A and Series B rounds, as well as other types of rounds. Crunchbase includes venture rounds of unknown series, corporate partnerships and other rounds above $3 million, and those below or equal to $15 million.
The later stage consists of the C-series, D-series, E-series and subsequent letter cycles after the “series [Letter]” naming conventions. Also included are venture rounds of unknown series, corporate operations and other rounds over $15 million.
A tech growth is a private equity round done by a company that has previously created a “venture”. (So basically, any traffic from previously defined levels.)
Illustration: Dom Guzman
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