€4.2 billion in capital raised by European tech in Q2. Brexit slowdown in Q3?

During the second quarter of 2016, European companies raised €4.2 billion in venture capital, Dealroom data shows. This figure is down 14% from €4.9 billion during the first quarter, but slightly up from €4.0 billion in the second quarter of 2015.

Below are three ways to analyse Q2 in more detail:

1. a detailed table of all Q2 ranked rounds by size. Scrolling down the list, the total transactions add up to €4.2 billion.
2. the Tech Heatmap to explore activity by city, by business model, and by industry.
3. the heatmap also allows you to go one level deeper, as each € number is a link to the underlying deals. For example, to see which Berlin companies raised capital in Q2.

Brexit slowdown in Q3?

The Brexit is likely to negatively impact European funding in Q3 and going forward. A slowdown was already anticipated before the Brexit. Indeed, we are seeing that this year’s Q3 is running 35% behind with €600M raised so far. However, the real impact may take a few more months to crystallise. It will also be very interesting to see how Brexit will affect international fund-flows in Europe.

UK impact

In the UK, companies raised a €1 billion (incl. Gett), roughly the same as the previous quarter. This sharply contradicts an article by the FT claiming Q2 funding collapsed due to Brexit, which timing-wise didn’t make sense. It is however very likely, that the Brexit will have an adverse effect on aggregate funding in Q3 and going forward. UK funding in Q3 has been relatively robust so far but overall European funding is  running 35% behind with €600M raised so far.

Tech.eu

The venerable Tech.eu team provide additional insights on the Q2 data, and we strongly suggest to read that in conjunction with our data. We synchronise our funding data with theirs, give or take a few small differences. For example, we count ride hailing app Gett in London, not Tel Aviv. We share their conclusion that Q2 was pretty solid but we should expect a significantly slower Q3.

Note on how to interpret quarterly funding data

1. Quarterly data tends to be skewed by a few large deals, making it pointless to draw conclusions from smallish (say <20%) fluctuations. For example, had Spotify done a big round in Q2 in stead of Q1, the numbers would have looked totally different. This also means it makes little sense to say “City X surpassed City Y in funding in Q2”.
2. More funding isn’t necessarily better. Funding data is not like, say, GDP or employment data. For example, a drop in funding activity in a specific industry (say, Food delivery) can also mean that this industry is in a phase of execution and focus on profitability. More total VC funding is good news for founders looking to raise. But a better measure for overall “ecosystem success” are actually exits. We will soon do a report comparing capital invested to capital realised via exit.
3. Quarterly data is however very useful for a lot of things. Firstly, it is broadly interpreted as a gauge for market sentiment and, directionally, for valuation levels. In a way funding data is like a stock market index, but with a lot less accuracy and more margin of error. For example, to reflect on what happened the past months. Our U/I is  especially helpful to review multiple deals by country and industry in great detail. Also, to compare the relative strength of ecosystems (e.g. the fact that other countries are catching up to the UK).

Notes on Dealroom.co’s methodology

Dealroom data is collected through a combination of user-generated data from over 9,000 contributors, in combination with a lot of manual curation and machine learning. Each round is categorised using our proprietary taxonomy of industries and business models. Because of this open-data model, we can collect more data from even the smallest corners of the world.

The data excludes: buyouts, mergers, acquisitions, other secondary transactions, lending capital, IPOs, post IPO equity/convertibles/debt.

The data includes: Israel, Turkey, and Russia into the aggregate numbers. Since all details are provided (see above), it is easy to carve-out certain countries or deals from the totals.

We use fixed exchange rates throughout. Numbers are easier to reconcile and thus more transparent this way. A fluctuating exchange rate, while adding complexity, does not add precision.

All Dealroom quarterly funding data can be reviewed deal by deal, with a free Dealroom account. This makes some data providers, who want to charge huge fees for publicly available data, very upset. We will not name names, but it rhymes with CB INSIGHTS.