European venture funding plunges as inflation hits private markets
European venture capital funding slumped in the second quarter of the year as an investment boom tailed off amid soaring inflation and market shocks brought on by Russia’s invasion of Ukraine, new research has revealed.
Total venture capital investment into European firms fell over 18 per cent to $26.4bn between April and June, after a bumper first quarter which saw $32.2bn injected into firms across the continent, according to a European Pulse Check from the Silicon Valley Bank and Dealroom.
The slowdown came as the threat of an extended period of rising interest rates puts an end to the cheap cash that fuelled a venture capital funding boom last year. The IPO market also remains largely shuttered, closing off the option of lucrative exits for investors.
Silicon Valley Bank’s UK head of relationship banking for Europe said that a correction was now being felt across the markets as the macroeconomic environment deteriorates.
“‘Recalibration’ is a term thatʼs being widely used to describe the rapidly-changing market conditions in the first half of 2022,” he said.
“In truth, the slowdown – triggered by challenging public markets and wider macro events – is feeling deeper than a recalibration although is by no means an existential event for the industry.”
Bumfrey said there was “ample dry powder” within the ecosystem however, to provide fuel to firms with a “resilient business model and a clear path to profitability”.
UK firms held up most strongly for investment levels across the first half of the year in general, the report found, leading by both enterprise value and VC funding in Europe.
Around 32 per cent of the value created in Europe in 2022 so far has been generated in the UK while UK firms attracted 35 per cent of European VC investments in the first halfof the year followed by Germany and France respectively.