Last year marked the first time that investment in European and Israeli startups crossed the €100 billion mark, according to PitchBook data, and one of the most significant drivers was the increased presence of US VCs.
US investors took part in 2,210 deals last year worth a total of €70.7 billion (about $78.5 billion), a boost of 50% and 194%, respectively, over 2020. US VCs are increasingly looking to get in on the ground floor, with investments in early-stage rounds surpassing late-stage for the first time, proving such firms are increasingly comfortable with European dealmaking.
“Europe is increasingly attracting attention from wealthy US investors looking to invest in new markets,” said Nalin Patel, a PitchBook senior research analyst. “The European ecosystem could provide better ‘bang for your buck’ investments, as valuations tied to companies have historically been lower than they are in more-established ecosystems in the US.”
While the gap in valuations is narrowing, the difference is still significant: The median late-stage pre-money valuation for a US-based startup stood at $753.3 million in 2021, compared with €285.6 million in Europe.
The presence of US investors has, however, pushed up deal sizes, and valuations follow. The median European round with US participation nearly doubled in 2021 to €38 million, compared with €19.4 million the year before. Deals with no US investors are a fraction of the size, at a median of €6.3 million in 2021.
Many of Europe’s largest rounds were led by or included at least one US-based investor. Payments specialist Checkout.com’s $1 billion Series D included Altimeter and Dragoneer. Tiger Global co-led an $800 million Series E in challenger bank Revolut. Process mining software provider Celonis became Germany’s most valuable VC-backed company after a $1 billion Series D led by Durable Capital Partners and T. Rowe Price.
With venture investment in Europe on the rise and an abundance of investable capital, US participation is set to continue as VCs look for value and solid returns, and their presence will likely result in growing deal sizes and valuations.
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