𝗦𝗼𝘂𝗿𝗰𝗲: 𝗣𝗶𝘁𝗰𝗵𝗕𝗼𝗼𝗸 𝗗𝗮𝘁𝗮, 𝗜𝗻𝗰. "𝗤2 2024 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗩𝗲𝗻𝘁𝘂𝗿𝗲 𝗥𝗲𝗽𝗼𝗿𝘁." 𝗣𝘂𝗯𝗹𝗶𝘀𝗵𝗲𝗱 𝗼𝗻 𝗝𝘂𝗹𝘆 17 2024. 𝗦𝗽𝗼𝗻𝘀𝗼𝗿𝗲𝗱 𝗯𝘆 𝗝.𝗣. 𝗠𝗼𝗿𝗴𝗮𝗻.

Sami Chowdhury

Executive Director at Royal Capital Ltd. | Tennis Player | Science & Tech Enthusiast | Exploring Market Opportunities

Here are some key takeaways that caught my attention. It's an excellent read for VC enthusiasts…

𝗥𝗶𝘀𝗶𝗻𝗴 𝘀𝘁𝗮𝗿𝘀: AI and Machine Learning (ML)

It looks like the French AI scene is closing the gap with the Brits.

AI & ML have become the second-most-active vertical in Europe in 2024, with a total deal value of €6.3 billion in H1. Q2 alone saw €4.2 billion in deal value, doubling from the previous quarter. This sector continues to attract substantial investment, particularly in the UK and France, making it a key area for investors to watch.

The UK leads in AI & ML startups (1,319), with France following at 520. Despite the UK's dominance, France's AI hub is rapidly growing, with its share of European AI & ML deal value doubling in the past year.

𝗩𝗲𝗻𝘁𝘂𝗿𝗲 𝗗𝗲𝗯𝘁 𝗢𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝗶𝗲𝘀:

It's like hitting the jackpot for founders—great deals on debt and non-dilutive capital!

This asset class has grown substantially in Europe, with a year-to-date (YTD) value of €17.6 billion in 2024, considerably higher than the €12.6 billion recorded in 2023. As valuations face pressure, venture debt becomes an increasingly attractive source of non-dilutive capital for startups. There is a great opportunity for new players to enter the venture debt market.

𝗘𝘅𝗶𝘁 𝗔𝗰𝘁𝗶𝘃𝗶𝘁𝘆:

It is a great time to shop in Europe if you are into distressed assets…

The exit landscape is currently characterized by distressed valuations, with a significant portion of exit value coming from acquisitions rather than public listings. In H1 2024, 85.6% of VC-backed exit value was derived from acquisitions, the highest proportion in the past decade. The most significant IPO was the €11.3 billion listing of the Spanish luxury firm Puig, which skewed the overall exit data.

There is potential for more M&A opportunities as startups look for exits in a tough IPO market. Strategic acquisitions of VC-backed companies at favorable valuations are worth considering.

𝗙𝘂𝗻𝗱𝗿𝗮𝗶𝘀𝗶𝗻𝗴 𝗧𝗿𝗲𝗻𝗱𝘀:

Looks like the French and Benelux have become the best beggars in the fundraising game.

The fundraising landscape is shifting towards smaller funds, with those under €250 million capturing 55.8% of the capital raised in H1 2024. Emerging managers are also taking a larger share of fundraising value, representing 70.6% of fundraising volume.

For the first time since 2018, France & Benelux (Belgium, the Netherlands, and Luxembourg) surpassed the UK & Ireland in capital raised, indicating a shift in regional investment dynamics.

𝗦𝗲𝗰𝘁𝗼𝗿 𝗙𝗼𝗰𝘂𝘀:

Leading sectors: Life sciences, SaaS, and mobile are leading the pack in terms of exit values, showcasing the strength of healthcare innovation, cloud-based solutions, and mobile technologies.

Declining Sectors: Interestingly, traditional powerhouses like Technology, Media & Telecommunications (TMT), and cybersecurity have seen their rankings decline in exits. Cybersecurity is now the lowest-ranked vertical in VC deal value. Despite a drop in its ranking, cyber security remains a critical area for investment due to increasing security concerns.

Emerging sectors: The report indicates that cleantech has maintained its position as the third-ranked vertical in terms of deal value. This suggests a continued and growing interest in sustainable and environmentally friendly technologies. Although not necessarily new, fintech continues to attract substantial investment, indicating ongoing innovation and disruption in financial services.

AI and machine learning: While not explicitly ranked, AI has become a dominant force in the VC landscape, emerging as the second-most-active vertical in Europe.

𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗖𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀:

AI startups should consider hiring a few more AI-powered Attorneys.

Regulatory considerations are particularly significant in the European venture landscape, especially in sectors like AI, where the recently approved EU AI Act is set to reshape the industry. This legislation, the first of its kind globally, introduces stringent requirements around data usage, algorithmic transparency, and ethical AI development. For investors, it's essential to evaluate how startups are adapting to these new regulations, as compliance will be critical for long-term success and scalability in the European market.

#VentureCapital #SectorTrends #EuropeanStartups