European VC funding at near record in Q3 2020, and VCs have more money than ever
After an easing in venture activity in H1 2020, European funding is back at near record levels in Q3. European startups and scaleups raised €10.5B in Q3 2020, the second highest total for a single quarter ever, after Q2 2019.
Let’s take a look at the underlying data.
Q3 2020 was Europe’s second highest quarter ever for VC investment
European VC appetite seemed unfazed by the pandemic, as VC investment in Europe reached €10.5 billion in Q3 2020, crossing the €10B mark in a single quarter for just the third time. This is up 25% compared to the previous quarter and 1% on Q3 2019.
Some of the rounds contributing to the leap in investment include Klarna ($650M, Sweden), Northvolt ($600M, Sweden) Ki Insurance ($500M, UK) and Karma Kitchen (£252M, UK).
Investment has recovered across Europe
Investment activity has continued to recover across most countries in Europe in Q3, with the UK, Germany and Sweden each posting their second highest quarterly ever investment figures in Q3 2020. Sweden features amongst the top three European countries for investment in Q3, lead by megarounds from Klarna and Northvolt.
Most funded industries of the quarter
Switching the heatmap to show investment by industry shows us that Health, Fintech and Enterprise Software still lead in Q3. Excluding megarounds of over €100M allows us to better see the underlying investment trends. Health leads Fintech for a second consecutive quarter during the pandemic, the first time this has happened since H2 2016. Customize your own view by adding and removing filters such as round or company size, founder gender, location or source of funds.
The rise of the mega rounds
Q3 has seen the most mega rounds (€100M-€250M) mega rounds plus (€250M+) of any quarter in Europe. European companies are regularly closing rounds in the hundreds of millions at a scale unimaginable just a few years ago.
European VCs have raised more in 2020 to date than in any previous year. European VCs have raised €14B in new funds in 2020, compared to €12.6B in full year 2019, a previous record. Significant new funds announced in Q3 2020 include Dawn Capital’s new $400M Dawn IV fund, £167M for ETF Partners and $170M for BB Pureos Bioventures.
Convertible transactions gain pandemic popularity
Convertible transactions have been finding popularity during the pandemic. Excluding an outlier Spotify round from 2016, Q2 and Q3 2020 each saw new records for European convertible transaction totals, boosted in part by the UK’s pandemic-bridging Future Fund convert scheme, and a €255M round for Germany’s Auto1 Group.
While the shock of the pandemic was felt in every financial sector in early 2020, venture capital is showing this was no long term trend. After a period of hesitation, VCs are making up for lost time in H2 2020.