European Venture & Growth Mid-Year Update

Against the backdrop of a resilient equity market performance in 1H24, we have continued to observe a rebound in Venture & Growth funding in Europe. Despite some recent challenges in the public markets, we remain cautiously optimistic heading into the second half of the year, noting improvement across several private market indicators including rising funding volumes, the return of larger rounds, and expanding sector breadth.

The key takeaways are highlighted below.

• Public equity performance has been robust: Public equities traded well in 1H24, particularly in the US where companies exposed to AI outperformed. However, market breadth was narrow with a handful of stocks driving outsized returns. Recent price volatility highlights potential underlying fragility in the market.

• VC market may be broadening: European VC funding in 1H was flat sequentially but remained well ahead year-on-year (+43%). ‘HardTech’ sectors (including AI, Life Sciences and Energy Transition) continued to contribute the majority of funding, but there was increasing momentum from Enterprise Software and FinTech.

• Larger funding rounds return: The share of "mega-rounds" >$250m notably increased in the first half of the year to around 25% of total value, up from only 7% in 1H23. Furthermore, there are growing examples of companies who raised >$100m in the post-COVID venture boom likely returning to the equity funding market

• Some investors continue to pursue DPI: Despite improving primary funding trends which we have identified, in our view GPs remain under some pressure to deliver improved liquidity to their LPs. With the IPO market and venture-backed M&A exits only slowly recovering, secondary sales remain in focus.

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