The Silicon Valley slowdown comes to Europe: IPOs, M&A and investment fell at the start of the year

Lynsey Barber
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Venture capital-backed firms in Europe received less investment (Source: Getty)

The year started off with several high profile tech deals in the UK, however investment in venture-backed startups across the continent fell and M&A and IPOs fizzled out.

Here are the six things you need to know about VC investment right now.

1. Investment falls

Investment across Europe plummeted at the start of the year, the latest figures from Dow Jones Venture Source reveal. Deal volume in the first quarter of 2016 dropped 12 per cent on the previous quarter, while the amount of money raised fell by more than a quarter to its lowest since the end of 2014.

There were 411 deals worth €2.4bn at the start of the year.

2. M&A melts

The value of mergers and acquisitions fell 45 per cent to €3.7bn at the start of the year compared the end of 2015, and 16 per cent year-on-year. The number of deals increased 28 per cent on the last quarter, to 50, but fell six per cent year-on-year.

3. Significant IPO drop off

The number of venture-backed IPOs also fell by more than half and to its lowest since the third quarter of 2013 in terms of both the number and value. Just five companies went public, compared to 14 last quarter and 12 the same time last year, while the amount raised fell 82 per cent on last quarter to €110m.

4. Money pours into the UK

UK companies and Blippar helped the UK land the greatest amount of funding of any country in Europe with four of the top five companies from the UK.

Some €974m poured into the UK across 11 deals and accounted for 40 per cent of all European activity. UK investment also included biotech companies Mission Therapeutics and Autolus.

And it was healthcare startups which nabbed the greatest amount of funding across Europe, but it was business and financial services where the greatest number of deals were made.

5. Deal size on the up

The average size of European deals stood at €2.56m, the second largest ever recorded after the second quarter of 2015.

6. More VC cash is coming

However, there was a ray of light indicating that a slowdown won't last, with venture capital funds raising record amounts of cash.

Some 25 VC funds in the region raised a record €2.85bn, more than double the amount of capital in the same period last year.

Index Ventures, Accel Partners and Octopus are among those which have recently closed new funds, with Index's £377m fund the largest, and accounting for 18 per cent of the total raised in the first quarter.