According to PitchBook’s Q2 2022 European Venture Capital Valuation Report, funding in the first six months of 2022 is up from the previous year’s investment figures, with a notable 32% increase in early-stage deal sizes to €2.5 million.
Despite late-stage deal sizes being affected by public market volatility and concerns about the overvaluation of the asset class, they still increased by 38%.
Pre-money valuations of European venture capital firms outperformed expectations despite uncertainty in financial markets negatively impacting the global investment landscape.
The market is not as bleak as forecasted last year, with several large funding rounds have been completed in Europe over the past few months.
For example, process mining software provider Celonis raised $1 billion in August, and fintech company SumUp raised €590 million in June.
According to PitchBook estimates, “For early-stage European companies, valuations are relatively insulated to public market volatility and are currently 34.1% higher than in 2021.”
“Also, valuation shifts take a few quarters to feed into angel and seed rounds, as investors value businesses based on their future potential.”
As financial markets are revalued in 2022, the Venture capital ecosystem may take several quarters for specific changes to be reflected in the market.
The pre-money valuation of European VC businesses has shown resilience amid the uncertainty of the financial market, as actual market valuations are currently higher than expected despite headwinds in the global investment environment.
Excitingly, angel investment in the first half of this year was even 10% higher than last year’s €500,000 million in the first half of 2022.
According to a PitchBook report, some companies have even attracted non-traditional VC backers. Especially with venture capital as a long-term strategy, short-term volatility is part of the funding cycle.
Investors and companies continue to maintain their trading capabilities amid growing challenges.
A PitchBook survey illustrates that capital liquidity remains strong with business valuations and funding levels still high, signalling many potential opportunities during challenging times.
Regardless of the economic environment, venture capital is still expected by financial markets.