European VC deal value and fundraising buoyant in Q3'20
Deal value for 2020 stands at €29.5bn at the end of the third quarter, on track to surpass the record €37.2bn deployed in 2019. Pitchbook’s Q3 European Venture Report underlined that contrary to expectations of investors focussing on existing portfolio, there was no drastic reduction in first-time rounds as investors continued to sear for new portfolio companies. Almost 93.4% of VC through Q3 2020 went to follow-on rounds. This gulf between first-financing and follow-on VC deal value to developed start-ups utilising funding from growing non-traditional sources such as CVC arms, sovereign wealth funds, and serial angel investors to raise larger follow-on rounds.
Despite the current climate, VC fundraising in Europe stood at €11.1bn in the third quarter. Fundraising totals have been driven by strong returns from venture, swelling amounts of capital available to investors, and improved awareness and accessibility to VC-backed companies via new VC vehicles. The report underlined that the pandemic has not obstructed long-term fundraising trends in Europe, as fund sizes have continued to grow in 2020.
The Covid-19 pandemic has sharpened focus on environmental, social, and governance (ESG) frameworks. Founders, investors, and management teams are increasingly evaluating the holistic impacts of funding and growth targets on wider areas of society and populations, stated the report. For instance, in Q3, London-based ETF Partners closed its third Environmental Technologies Fund at €185.1 million, a substantial pledge to back solutions addressing sustainability through innovation.
The pandemic has not hampered first-time European VC funds coming to market. Pitchbook added that 21 such vehicles have closed through Q3 2020 with a total €1.5bn raised, surpassing the annual aggregate capital raised by first-time funds during each of the last three years.