Venture funding for European startups reached $10 billion in the third quarter of 2024 – the lowest quarter since the third quarter of 2020, according to Crunchbase data.
Startup funding on the continent has fallen dramatically: 36% quarter-on-quarter and 39% year-on-year. Of the three countries with the highest startup financing in Europe, Germany was the only one to show quarter-on-quarter and year-on-year growth.
While the decline in European funding in the third quarter is significant, it is value noting that enterprise capital investment has fluctuated since the starting of the current VC downturn, from a low of $12 billion prior to this quarter to a high of just about $17 billion. Funding may increase again in the fourth quarter.
Late-stage financing declined the most in the third quarter, down greater than 50% year-over-year. There was also a decline in seeds, by 18% 12 months on 12 months. Funding for European early-stage startups fell by 12% year-on-year.
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Leading countries
Startup funding in the UK, the leading country for enterprise investing in Europe, fell 43% year-over-year to $3.2 billion, according to Crunchbase data.
Funding for German-based startups grew by greater than a third last quarter to $2.4 billion, making it the second-largest country for enterprise capital funding in Europe in the third quarter.
France, as a rule Europe’s second-largest startup market, slowed to $1.4 billion invested last quarter.
“Europe is really a collection of many smaller markets.” Teddy Wardiemanaging director w Insight Partners in New York, who previously worked in European funds Atomic AND Capital of Dawn– he said in an interview. Outside the continent, firms tend to think of Europe as one big region, when in reality investors have to approach Europe market by market, he said.
The European late stage has slowed down
Late-stage funding for European startups in the third quarter totaled $4.2 billion across greater than 70 rounds, Crunchbase data shows. This means late-stage funding is down 57% 12 months over 12 months.
Notable late-stage funding went to:
Early stage financing
European early-stage startup funding last quarter reached $4.5 billion across just over 290 funding rounds. These include:
- A nuclear energy company based in Paris Newcleo raised $151 million in Series A funding;
- An organization providing ESG compliance services Osapiebased in Mannheim, Germany, raised $120 million in Series B funding led by Goldman Sachs Alternatives; AND
- Based in Munich Marvel mergerlaser fusion energy company raised $70 million in Series B round led by HV capital.
Three health technology firms have also raised large early-stage rounds:
Seed retraction?
European seed funding reached $1.5 billion across 800 rounds last quarter. That’s down from $1.8 billion in the third quarter of 2023.
Still, it’s too early to say definitively whether there will likely be a slowdown in funding at this stage, as seed rounds are typically added to the Crunchbase dataset after the close of a quarter.
A growing competitive market
Before 2020, European quarterly startup funding peaked at $11 billion. While funding is the lowest we have seen in 4 years, funding to date for European startups in 2024 still far exceeds pre-pandemic funding.
Despite the slower funding environment, “markets are more competitive than ever,” Wardi said, noting that he has seen European startups expand quite rapidly in other European countries in addition to in the U.S.
Startups have to move quickly, otherwise another person could benefit from the opportunity, he said.
In software, European start-ups compete on a global stage. “For most software categories, it’s getting harder and harder to find local winners because it’s effectively a global market,” Wardi said. “Customers all over the world have very similar needs and don’t really care much about where the software they buy comes from, as long as it’s best in class.”
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Methodology
The data in this report comes directly from Crunchbase and is based on reported data. The data provided is as of October 2, 2024.
Please note that data transfer delays are most noticeable in the earliest stages of a enterprise, with seed funding amounts increasing significantly after quarter/12 months end.
Please note that each one financing amounts are in US dollars unless otherwise noted. Crunchbase converts foreign currency to U.S. dollars at the spot rate in effect on the date financing rounds, acquisitions, IPOs and other financial events are reported. Even if these events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.
Glossary of financing terms
Effective January 2023, we have modified the way we include corporate financing rounds in our reporting. Corporate rounds are only included if the company has raised seed financing as a part of a series financing round.
Seeds and Angels consist of seed, pre-seed and angel rounds. Crunchbase also includes enterprise rounds of unknown series, equity crowdfunding, and convertible notes with a size of $3 million (in U.S. dollars or a U.S. dollar equivalent) or less.
The early stage consists of Series A and Series B rounds, in addition to other sorts of rounds. Crunchbase includes enterprise rounds of unknown series, corporate ventures and other rounds above $3 million and those valued at lower than or equal to $15 million.
The Late Stage consists of Series C, Series D, Series E, and later lettered expedition rounds following the “Series [Letter]“Naming convention. Also included are enterprise rounds of unknown series, corporate ventures and other rounds valued at greater than $15 million.
A technology development is a private equity round led by a company that has previously raised a “venture” round. (Basically any round from the pre-defined stages.)