Europe is suffering from a big hangover after the tech investment party of the 2020-2021 period. That said, compared to pre-pandemic levels, VC investment in European startups is up, historically speaking, and reached $60 billion, according to a new report. However, the anomaly of the surge in investment over the pandemic stands in marked contrast to that growth and has created significant headwinds, even though there are signs of ‘green shoots’.
Global law firm Orrick analyzed over 350 VC and growth equity investments its clients completed in Europe last year.
The Total capital raised in Europe was $61.8 billion. 2023 marked a reset and major correction in investment levels globally. Of the top 3 global regions for VC – Europe, Asia, and North America – Europe is the only one to exceed 2019 levels in 2023.
According to the report, Europe is sitting on “record levels of dry powder” and “producing more new founders than the U.S.”, funding remains slow.
Only 11 new unicorns emerged from Europe last year, the fewest in a decade, and a growing number of unicorns lost their status.
Climate Tech overtook FinTech as Europe’s most popular sector
AI’s share of total investment in Europe soared to a record high of 17%5.
Orrick found that investors — emboldened by the downturn in funding — are ‘turning the screws’, exercising greater control over investments, with founders being required to stand behind warranties in 39% of venture deals.
There was a clear drop in later-stage financings, deal volume dropped, and founders have been thrown towards other strategies such as alternative financing methods, or racing towards revenues and profits.
There was an “unprecedented spike” in the ability of new investors to enter tech, as founders looked for new lead investors, and an “uptick” in convertible debt, SAFEs, and ASAs, with convertible financings representing 23% of rounds in 2023.
Investors generally focused on managing their existing portfolios, secondary transactions increased, and SaaS and AI continued to be popular. Interestingly, the number of FinTech investments declined.
European 2023 tech investment deals (Orrick)
At each stage, deal value is down, with the most dramatic fall in later-stage deals.
Early-stage deal value dropped by 40%, even though early-stage investors are still the most active.
There was a decline in ‘mega-rounds’ exceeding $100M+. However, the IPO landscape showed “signs of life” with ARM’s $55 billion IPO, and M&A activity showed “green shoots.”
In the UK, VCs are under pressure to deliver returns, which is likely to lead to increased demand for secondaries, greater M&A activity and consolidation.
In France there’s been a shift from ‘founder-friendly’ terms towards more investor-friendly terms, in marked contrast to the Uk, where the opposite is true.
In Germany, a growing demand from LPs for liquidity is expected to “energize the tech M&A pipeline.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
