2019 saw a record-breaking aggregate deal value for the European venture landscape as alternative and international sources of capital flooded in. Venture fundraising has also hit a new peak.
It is not exactly a secret that the low interest rate policy is causing a glut of money in the capital markets. As investors search for returns, more and more money is now entering the European venture capital (VC) sector. In the absence of profitable alternatives, investors feel the urge to take more risks. This might actually be good, as those investments should eventually lead to more innovation, more jobs, and a better standard of living for everyone. It might also be good for start-ups, as the chance to succeed with their fundraising activities could increase – and they could in turn sell equity at higher prices (which would be the other side of the coin from an investor’s perspective).
Still, not all considerations stated above seem to be true. Actually, according to Pitch Book Analysis, the number of VC-backed deals declined by 15% last year, while the average deal size grew by more than 30%. VCs are looking for bigger tickets and are willing to pay higher prices. At the same time, not only the number but also the average size of early (and smaller) funding rounds declined.
For investors who are active on Aescuvest, there are two pieces of good news. First, the competition for investors in the early-stage arena is still intense, which makes the selection very diverse. Second, the appetite for later-stage growth investments is very strong, which paves the way for great exit deals.