The German solar start-up Enpal collects 215 million euros from investors in the spring.
(Photo: Enpal )
Berlin Not only are European start-ups finding it increasingly difficult to raise money, but also their investors. According to the latest surveys by the data provider Pitchbook, European venture capitalists may have to make do with as little capital this year as they did in 2015. According to Pitchbook, investors have little interest in investing in new funds.
This is mainly due to the fact that there are still hardly any exit opportunities for start-ups and there is therefore less liquidity in the market. In Germany, for example, there were no exits in the first quarter. There were exits across Europe – i.e. IPOs, buy-outs and takeovers – with a total value of 1.6 billion euros. This corresponds to a minus of almost 70 percent compared to the previous quarter.
According to the consulting firm EY, the issuance volume shrank by 61 percent in the first quarter to $21.5 billion – the lowest level since the first quarter of 2019. The initial listing of the German web hosting provider Ionos in Frankfurt was also disappointing for investors.
European investors collect 3.4 billion euros
At the same time, according to the Pitchbook, the numerous job cuts at start-ups and older technology companies such as Delivery Hero are creating a cautious mood among investors. In view of the turnaround in interest rates and high inflation, other investment options currently often appear more attractive than risky funds with a long-term investment horizon.
Specifically, European venture capitalists (VCs) raised a total of 3.4 billion euros from their investors such as pension funds, family offices, companies, state institutions and others in the first quarter. According to Pitchbook, this number was probably artificially inflated. Since it takes a few months to open a fund, it also includes funds that were launched last year.
The sum could therefore still be well below the 3.4 billion euros in the next three quarters. Pitchbook assumes that VCs could ultimately earn around eleven billion euros in 2023 and thus less than in 2015. In 2022 they had reached the top value of more than 27 billion euros.
>> Read More: High-Tech Gründerfonds can invest even more in the future
Despite the slump, some larger funds emerged in the first quarter. The Hightech Gründerfonds (HTGF) provided a ray of hope throughout Europe. In February, the early-stage investor closed its largest fund since it was founded 18 years ago with a total volume of almost half a billion euros, putting it well ahead of Europe’s number two in the first quarter, McWin Capital Partners, which now has 300 million euros for investments in the food sector are available.
Investment volumes collapse by a third
According to Pitchbook, a total of 11.8 billion euros was invested in European start-ups from January to March, 32 percent less than in the same period last year. In Germany, only 1.5 billion euros were invested in young companies in the three months. In 2022 it was a total of 14.5 billion euros. The record year of 2021, when, according to venture capitalist Atomico, more than 100 billion dollars was invested across Europe, is now a long way off.
At the same time, a trend that started last year continued at the beginning of the year. The number of deals continued to slow, falling by around a fifth. This is also related to the collapse of the Silicon Valley Bank and concerns that other banks could have problems. According to Pitchbook, this in turn could have a domino effect in the fintech sector, which is one of the main drivers of VC activities in Europe. This reinforces the reluctance of investors. “We expect activity to remain subdued until inflation falls, economic growth picks up and monetary policy is relaxed,” Pitchbook Europe analyst Nalin Patel told Handelsblatt.
>> Read also: Asset manager Fidelity joins Fintech Moonfare
Although most start-ups made losses, investors currently want to support start-ups that are capital-efficient and have a clear path towards profitability, according to Pitchbook. This is exactly what the Berlin solar company Enpal scored with at the beginning of the year.
The solar system rental company received a cash injection of EUR 215 million from owners and new investors, doubling its valuation to EUR 2.25 billion. With the higher valuation and the large cash injection, Enpal was one of the few bright spots in the first quarter in Europe.
Pitchbook now predicts further major deals in the climate sector this year. At the same time, the data provider highlighted another deal from Germany: It was only in March that the global asset manager Fidelity International acquired a stake in the Berlin fintech company Moonfare. Industry observers expect further partnerships and mergers among fintechs and digital asset managers in the current year. At Pitchbook it was said that such partnerships offer advantages for both sides.
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