PitchBook’s annual report reveals declining venture capital investment in Europe, but a booming artificial intelligence sector. Despite economic challenges, optimism remains cautious, and 2024 has seen a return of exits, a sign of market revitalization.
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According to an annual report from PitchBook, the total amount invested in European companies by venture capital firms decreased last year.
The value of individual transactions increased, but the total number of transactions fell from 11,408 to 9,600 during the year, resulting in a decline in the overall level of investment.
Last year, however, the mood was one of “cautious optimism,” according to PitchBookas it appeared that market conditions were beginning to improve.
GDP growth in the eurozone has remained lackluster, although the ECB made four interest rate cuts last year in response to slowing inflation.
A further decline in borrowing costs is expected in 2025, although GDP growth is expected to be modest.
In the United Kingdom, the Bank of England eased fiscal conditions by cutting its key rate twice last year.
The boom in artificial intelligence
In terms of transaction value, British AI company GreenScale scored the biggest win in the last quarter and the whole of 2024, closing an investment worth around $1.198 billion. euros.
AI companies Poolside and Lighthouse, based in France and the United Kingdom respectively, came in second and third place last quarter. They concluded contracts worth 450 million euros and 344.7 million euros.
“It is hardly surprising that six of the top 10 deals in Europe in 2024 were by AI companies,” PitchBook noted.
“The rise of AI is not something we’ve seen since the rise of the internet, with the entire tech industry hyperfocused on one category.”
The UK has the largest number of venture capital firms specializing in AI projects, followed closely by France and Germany.
Investments in AI on the continent amount to €14.6 billion in 2024, representing a quarter of the value of European transactions.
Thursday’s report also highlighted growth in verticals such as life sciences, oncology, mobility technology and food technology.
Year-over-year, deal values in cleantech and fintech declined by 26.5% and 19.8%, respectively, although these two verticals are still among the top five sectors with carried out the greatest number of transactions during the year.
ADVERTISEMENTFundraising in Europe
Regarding the amount of European venture capital funds, the capital raised in 2024 did not change much from year to year, amounting to €20.5 billion.
-According to PitchBook, this total was supported by an increase in large funds, although the amount of individual closes decreased.
The median fund size in Europe was recorded at €71.3 million, an all-time high.
ADVERTISEMENTAmong the largest fundraisings, we can cite the British fund Index Ventures Growth VII (1.4 billion euros), followed by the Dutch fund Forbion Ventures Fund VII (890 million euros).
In terms of total capital raised, the UK tops the fundraising rankings, followed by France and the DACH region (Germany, Austria and Switzerland).
Southern Europe also increased its share with significant fundraising in Spain.
Looking ahead to 2025, PitchBook forecasts that capital raised will remain lackluster, as megafunds that raised money in 2024 are unlikely to do so again in the near future.
ADVERTISEMENTOptimism about releases
On a more positive note, analysts noted that “2024 was the year of return of exits”, as investors sold stakes in companies through initial public offerings (IPOs) or acquisitions.
This is a positive sign for the market, as the ability to offload investments builds confidence and provides more financing opportunities.
If a few releases could be observed at the end of 2023, these sales were made at reduced prices.
ADVERTISEMENTThe second and third quarters of 2024 showed an increase in momentum, supported by the IPOs of the Spanish company Puig and the British company EyeBio.
The rise of subprime debt
Venture debt was a major trend seen in 2024, PitchBook said, with annual deal value up 27.3% year-on-year to €17.2 billion.
Venture debt involves companies taking out loans to finance their operations – without giving up much equity in the company.
ADVERTISEMENTA venture capital deal, on the other hand, typically involves exchanging money for shares in the company.
Compared to previous years, venture debt was used by a greater proportion of growth-stage companies, i.e. more mature companies.
PitchBook forecasts a more moderate outlook for this type of financing in 2025, although risky debt is expected to remain significant.
“The key factor from our perspective is the expected absence of the large megadeals seen in 2024, as these companies are unlikely to return to the cap table in a year’s time,” the group said.
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