The European VC market experienced a challenging year overall, although the region showed some resilience in total capital invested in Q4 2016 compared to the experience of Asia and the Americas.
According to the latest ‘Venture Pulse’ KPMG report, European VC-backed companies raised $3.3bn (€3.10bn) across 585 deals in the last quarter of 2016. This means a decline of nearly 13% in VC invested compared to Q4 2015, although the more significant decline was by far in total activity, at a 42% drop across the same timeframe.
In the Americas, VC-backed companies raised $13.7bn across 1,832 deals in Q4 2016. Relative to the final quarter of 2015, US VC invested fell by nearly 25% in the last quarter, while the count of completed financings slid by 26.6%.
In Q4 2016 VC-backed companies in the Asia region raised $4.9bn across 357 deals. Year-over-year, the final quarter of 2016 saw a decline of 24.7% in VC invested relative to the same period in 2015, while activity slid by close to 29%.
European VC interest remains resilient
The KPMG report notes Europe showed more resilience in terms of total capital invested this quarter, despite the region facing geopolitical uncertainty in a number of EU member states, in addition to the uncertainties related to the UK’s Brexit vote.
The region’s growing diversity of technology ecosystems is likely one factor in the region’s relative resilience, the report notes, as Europe has established or growing technology hubs across Europe, such as London, Berlin, Madrid, Paris, Dublin, Stockholm and Tel Aviv.
“The maturity level of various tech hubs throughout Europe is rising, with new centers like Scandinavia and France emerging, while established hubs in Germany, the UK, Ireland and Israel continue to evolve,” the KPMG report highlights.
In a post-Brexit world, investors mostly appear to be taking a “business as usual” approach to their investments until more details around the UK’s Brexit strategy are released in 2017. While the investment environment remains cautious, a number of positive factors have helped with building resilience, including several successful IPO exits by European companies.
One positive trend seen during 2016 is the rising interest in governments supporting innovation and the development of technology hubs, with initiatives coming from Europe, in particular during Q4.
In the UK, the government announced £1b in funding to drive the development of digital infrastructure, part of which includes measures to support UK-based startups–such as investing £400m into venture capital firms through the British Business Bank.
The governments of Germany and France are also working together to create a €1bn fund to assist startups in their countries to grow beyond the seed-stage.