European VC soars in Q1

The blockbuster first quarter was not just an American affair

A stunning first quarter in venture capital funding was not restricted to the United States; Europe also had one hell of a start to the year.

According to data from Dealroom and Crunchbase News, an investor, and an analyst from PitchBook, European startups put together an impressive fundraising haul. The venture capital world kicked off its 2021 European investing cycle with enough activity to set the continent on the path that would crush yearly records.


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Inside the data, there’s lots to unpack, including which sectors of European startups stood out in terms of capital raised, rising seed and late-stage deals, and dollar volume. We’ll also need to discuss exits — the Deliveroo IPO and its various woes was not the only transaction from the period worth understanding.

As with our prior looks at AI startup fundraising and the United States’ own blistering start to the year, we’ll lean on multiple sources to ensure that we have a wide lens. And we’ll keep in mind that all venture capital data lags reality somewhat, as many deals from a particular period are not disclosed or discovered until long after they actually occurred.

In this case, it makes the numbers all the more impressive. Let’s get into the data.

The big numbers

Dealroom was first out of the gate, reporting that European startups had a record quarter in Q1 2021 back when April just got started. Its preliminary results for the first quarter indicated that startups on the continent raised €16.6 billion, or $19.9 billion at today’s exchange rates.

That total was not only a record, but what Dealroom described as double the results of Q1 2020. While we’ve become slightly inured in recent months to the venture capital market’s rapid pace and capital-rich environment, it’s worth considering for a moment, as the first quarter of last year ended, how few of us would have guessed that just a year later — as COVID-19 still harms public health and disrupts life and business — we’d see numbers like this.

The Dealroom data, however, was not all records. Round volume by the group’s estimates was down from the year-ago period, if slightly better than the last few quarters. The general move toward the later-stage and larger-round venture capital market is alive and well in Europe.

Crunchbase News released data next, reporting a similar $21.4 billion funding amount for European startups in the first quarter. The publication also reported that dollar result was “more than double funding amounts year over year and close to double over the last quarter of 2020.”

Late-stage numbers were so good in the first three months, according to the same report, a record number of unicorns were minted in Europe: 16, up from 15 in all of 2020 by Crunchbase’s count. That’s beyond impressive.

The Crunchbase report also details that European seed funding — more on the category in a moment — rose year over year to more than $1 billion, a solid result. Early-stage funding set an all-time record in the period at $5.8 billion, while late-stage also set an all-time record at $14.3 billion.

Records of such magnitude, especially when we anticipate all these numbers rising some over time, are impressive.

Finally, per Sifted’s overview of more Dealroom data, European fintech startups raised a record €7.2 billion, or $8.63 billion, in the first quarter, which the group described as “almost 4x more than the previous quarter.” The U.K. led the fintech race by a huge margin in the period, unsurprisingly but still notable in a post-Brexit era.

In sum, the European venture capital scene had a corking Q1 2021. With records set across stages, it was a good time to be a young company on the continent. Now let’s dig into some data more particular to two key stages in the venture lifecycle.

Records loom for seed funding

While we can’t speak of a full-on record for seed funding yet, it seems to be up in both volume and deal count, according to Crunchbase data.

The deal volume amounts to at least $1.3 billion, a 10% increase compared to Q4 2020, and a 26% increase year over year. More tellingly, as Crunchbase’s Gené Teare pointed out, this is “the highest amount yet recorded for a single quarter for [seed-stage] European startups,” which had never tallied above $1 billion before 2017.

Vitaly Laptenok is a general partner at Genesis Investments, an early-stage VC fund investing in Ukraine, Belarus and the Baltic countries. In his opinion, the “rapid growth [in seed funding] is the direct result of more money flowing into the startup investments market and more traditional investors becoming VCs.”

VCs are adapting to this increased level of competition in two ways, he said. On one hand, “investors offer more and more unique expertise or so-called ‘smart money.'” On the other, he added, they are prepared to show “more speed and flexibility in deals, which usually go hand in hand with higher valuations.”

Luckily for VCs, it isn’t just more money competing for the same number of startups. As Laptenok confirms, deal flow has increased both in quantity and quality: “The number of promising startups has increased as the pandemic accelerated the shift to online for many underdigitized industries in Europe, such as telemedicine, fitness and wellness, education, shopping and the event sphere.”

Three other sectors that have been gaining steam in Genesis’ pipeline, Laptenok said, are food tech, gaming and martech, the latter in connection to the privacy changes Apple and Google are mulling.

A late-stage explosion

Dealroom’s initial dataset details that European rounds worth a quarter-billion euros or more, about $300 million U.S. dollars, had what appears to be their best quarter ever. Those mega-deals were instrumental in helping the continent set records in Q1 2021.

Digging into the Crunchbase News data a bit more, we can see that those huge rounds helped late-stage money reach $14.3 billion in Europe during the three-month period. Of the 145 deals that the publication tagged as late-stage in the quarter, 54 were worth $100 million or more.

That number pales compared to the 167 so-called mega-rounds that were raised in the United States during the same period, but still works out to just over four per week. That’s hardly a slow pace, even if the United States has transcended to an even more exciting plane of private capital gambling.

The largest rounds in the region were massive: Klarna raised $1 billion (more on the company here), as did Cazoo (more here). Wolt put together a $530 million round, while Glovo raised €450 million and Checkout.com raised $450 million. Those are big numbers.

Our read is that the boom in mega-rounds that has become something akin to the norm here in the U.S. is resonating strongly in Europe. The late-stage acceleration is a global affair.

Rapid-fire exits

Crunchbase News reports that in the first quarter of 2021, 147 European exits were counted, those with values attached worth some $9.7 billion. To put those numbers into perspective, in Q4 2020, the totals were 115 deals worth $4.3 billion. The gaps are even more extreme if we compare the first quarter of 2021 to the first quarter of 2020.

Indeed, at least three European startups exited in non-IPO transactions for $1 billion or more, a figure that doubles to six if we lower the bar to $500 million. But it was the IPO market that most captivated us here at The Exchange. There were several European IPOs worth noting in the period, including the Huuuge, Deliveroo and Arrival debuts.

Huuuge, which makes consumer casino-style mobile games, raised $445 million in its IPO, listed in Warsaw. Deliveroo, a well-known U.K.-based on-demand service, listed in London and raised $2.1 billion. And Arrival, which builds electric vehicles, became what our sister publication Yahoo Finance called the “U.K.’s biggest tech IPO” after it was valued at $13 billion following its SPAC-led debut.

Deliveroo had a rough debut on the London Stock Exchange (LSE) on March 31, earning the IPO the damning nickname of “Floperoo.” Worse, things haven’t improved much since then: Shares are still trading well below their debut price, and very close to their all-time low. Indeed, cutting its IPO target range wasn’t enough for the delivery company to regain the market’s favor. While winds may turn in the long term, as they did for Facebook and Ocado, it appears that Deliveroo’s dual-class share structure and the uncertainty around its connection to workers were too much for many to bet on.

What does this say about the future of the London Stock Exchange as an IPO destination? We reached out to PitchBook EMEA private capital analyst Nalin Patel to get a better understanding of the broader trends at play. According to Patel, the level of appetite for Deliveroo stock doesn’t necessarily say much about it being on the LSE instead of a U.S. stock exchange. He points out another factor that is likely to weigh much more on the LSE’s competing potential: its upcoming rule changes that could relax some requirements.

The changes are expected to affect London’s ability to attract tech listings, with hopes to help it compete better against U.S. stock exchanges. They are also aimed at countering Euronext Amsterdam, which has been growing post-Brexit and whose rules make it potentially better placed to attract SPACs.

This is mostly theoretical because, at the moment, SPACs are still very much tied to the U.S., even for European companies, so it remains to be seen whether we’ll soon see SPACs from European unicorns onto European exchanges. In the meantime, there’s at least one company betting on London: cybersecurity firm Darktrace, which confirmed its intention to float on the LSE.

As we said when we digested the U.S. data, it is too early to say that we’re heading for all-time venture capital records in any particular region — or the whole world. But it does seem that it’s likely, given what happened thus far in 2021.

Let’s see if the underlying conditions that are helping fuel the venture boom hold.