Q1

2023

EUROPEAN
VC Valuations
Report
 Contents
Introduction 3 PitchBook Data, Inc.
John Gabbert Founder, CEO
Overview 4
Nizar Tarhuni Vice President, Institutional Research and Editorial
Angel and seed 4
Dylan Cox, CFA Head of Private Markets Research

Early-stage VC 6

Institutional Research Group

Late-stage VC 7
Analysis
Venture growth 8
Nalin Patel
Lead Analyst, EMEA Private
Up, down, and flat rounds 9
Capital
nalin.patel@pitchbook.com
Sectors 10
Navina Rajan
Senior Analyst, EMEA Private
Fintech 10 Capital
navina.rajan@pitchbook.com

Energy 11
Data
Regions 12
Charlie Farber
Senior Data Analyst
Nontraditional investors 14
Oscar Allaway
Associate Data Analyst
Unicorns 16
pbinstitutionalresearch@pitchbook.com

Liquidity 18

Publishing
Report designed by Drew Sanders

Published on May 15, 2023

Click here for PitchBook’s report methodologies.

2 Q1 2023 EUROPEAN VC VALUATIONS REPORT

 Introduction
In Q1 2023, European VC valuations and deal sizes reflected think nontraditional investor participation in private markets
contrasting trends as a combination of factors impacted will remain subdued as activity is restricted by denominator
startups at different financing stages. Lower growth rates, effects and more liquid assets are prioritised amid economic
workforce reductions, and tougher funding conditions have uncertainty.
surfaced in 2023. Valuations that ballooned in recent years,
particularly at later financing stages, have largely plateaued. In Q1 2023, flatter valuations were evident as the aggregate
With focus shifting towards profitability instead of growth at post-money valuations of all Europe-based unicorns levelled
all costs, further measures to improve capital efficiency could off. Indications of a cooler market have been apparent, and
be taken by founding teams. Upward inflationary pressure we expect substantial rounds at lofty valuations to be rare
coupled with interest rate hikes and low growth has hampered in 2023. In fact, we anticipate further downward pressure
growth prospects for businesses requiring financing. on valuations as capital availability shrinks and businesses
Due diligence processes have lengthened, with revenues, explore flat or down rounds over the next few quarters.
valuations, and runways under renewed scrutiny. Unicorns with high burn rates will be the first to show signs
of duress if recent costly investments combined with current
VC deal value with nontraditional investor participation market conditions hamper growth.
continues to correct. With macroeconomic pressures
and economic uncertainty worsening in recent months, The VC exit market remains subdued, where acquisition
nontraditional investor participation has dwindled. Deal activity is resilient over public listings. In Q1, the median
value with nontraditional investor participation continued to exit valuation decreased 34.8% YoY but grew 48.5% QoQ.
decrease in Q1 2023, falling 65.3% YoY, marking a new trough The trends in valuations dependent on strategy continue to
since the peak of Q4 2021. Within this, venture-growth stages diverge, with the median acquisition value up QoQ at €29.6
have seen the largest decline, with the median deal value at million but public listings declining 47.1% to €42.7 million.
€11.3 million, compared with €22.7 million in 2022. Overall, we

3 Q1 2023 EUROPEAN VC VALUATIONS REPORT INTRODUCTION

 Overview
Angel pre-money valuation (€M) dispersion by quarter
€14

€12

€10

€8

€6

€4

€2

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

In Q1 2023, European VC valuations and deal sizes as businesses looked to extend runway. We expect more
reflected contrasting trends as a combination of factors structure on deals in the near term, too, as VC-backed
impacted startups at different financing stages. After a companies look for capital amid more investor-friendly
boom in VC activity in 2021, which spilled into early 2022, term sheets.
reports of lower growth rates, workforce reductions, and
tougher funding conditions have surfaced in the past Angel
12 months. Valuations that ballooned in recent years,
particularly at later financing stages, have largely plateaued In Q1 2023, angel valuations were robust, with the median
in 2023 thus far. With focus shifting towards profitability pacing at €3.7 million—above the €3.0 million figure
instead of growth at all costs, further measures to improve registered in 2022. With fewer deals taking place in the
capital efficiency could be taken by founding teams. quarter, the uptick in the median valuation could be a result
Therefore, recalibrated valuations could be on the horizon of larger, publicised rounds skewing the figure upwards.
when fundings take place in upcoming quarters. Angel-backed companies could still be in “stealth mode”
or have minimal financial information, and therefore,
VC dealmaking activity decelerated in Q1 2023, as we expect figures to be detached from broader trends
investors have been more selective in their approach to witnessed at mature stages of the VC ecosystem. Angel
deploying capital. Upward inflationary pressure coupled investors with sufficient capital may find that investing
with interest rate hikes and low growth has hampered in a brand-new idea linked to downward pressure on VC
growth prospects for businesses requiring financing. valuations could work in their favour as they could get more
Startups across financing stages are experiencing one of bang for their buck. Moreover, several previously VC-backed
the toughest funding environments in recent history. Due companies have launched in market downturns, such as
diligence processes are being extended, with revenues, Uber and Airbnb, which could give confidence to founders
valuations, and runways under renewed scrutiny. Major seeking capital for their ideas.
rounds in Q1 involved debt portions to top up equity rounds

4 Q1 2023 EUROPEAN VC VALUATIONS REPORT OVERVIEW

 Angel deal value (€M) dispersion by quarter
€3

€2

€1

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Seed pre-money valuation (€M) dispersion by quarter

€25

€20

€15

€10

€5

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Seed may be tougher for startups in the current climate, but we

expect less mature companies to be protected from the
The median seed valuation was flat at €5.5 million in Q1 turbulence affecting companies with high costs. Current
2023, while the median deal value ticked upward marginally market conditions could force investors to concentrate
to €1.7 million, up from the €1.5 million full-year figure capital and resources on the best ideas that they think
logged in 2022. Startups that receive seed funding are could be long-term successes. As a result, competition
years away from an exit, and capital is typically used to among startups vying for capital could intensify selection
establish product-market fit and a go-to-market strategy. processes and create a more streamlined pipeline of high-
Thus, startups tend to be lean and less affected by near- quality investment opportunities for investors later in the
term uncertainty from poor growth rates. Early adoption VC lifecycle.

5 Q1 2023 EUROPEAN VC VALUATIONS REPORT OVERVIEW

 Seed deal value (€M) dispersion by quarter
€8

€7

€6

€5

€4

€3

€2

€1

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Early-stage VC pre-money valuation (€M) dispersion by quarter

€80

€70

€60

€50

€40

€30

€20

€10

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Early-stage VC able to command a premium in recent years and have

enjoyed a lengthy period of abundant capital. But 2022
During Q1 2023, median early-stage valuations dipped to started a shift in capital availability and growth prospects,
€5.5 million, a 15.4% QoQ drop and the third consecutive which has penetrated early-stage businesses into 2023. The
quarterly decline. Lower valuations have fed into the median early-stage valuation step-up is pacing at 1.4x in Q1
ecosystem in Q1 to ensure that they are closer to market 2023, significantly down from its 2.0x reading in 2022; this
expectations, comparable revenue multiples, and further indicates the tricky valuation market.
achievable growth rates. VC-backed companies have been

6 Q1 2023 EUROPEAN VC VALUATIONS REPORT OVERVIEW

 Early-stage VC deal value (€M) dispersion by quarter
€25

€20

€15

€10

€5

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Through Q1 2023, the median early-stage deal value is Late-stage VC

painting a more positive picture, pacing in line with 2022’s
€1.8 million. Early-stage capital deployment has benefited In Q1 2023, the median late-stage valuation increased 26.9%
from larger VC funds, nontraditional investors, and QoQ to €13.4 million. One major deal that helped boost
international backers in recent years. However, deal sizes the figure involved Germany-based Enpal obtaining €215.0
could constrict as portfolios are managed during the current million at a €2.2 billion pre-money valuation. Enpal offers a
downturn. Instead of chasing new deals, investors with subscription-based model that supplies and installs solar
existing exposure to several VC-backed companies may panels. Near-term uncertainty is slowing investment levels,
have to focus inwards on their existing portfolio companies but long-term investment opportunities are helping sustain
to ensure that they have sufficient runway. activity. Nonetheless, outlier companies can skew figures, and
we expect late-stage valuations to flatten in the near future.

Late-stage VC pre-money valuation (€M) dispersion by quarter

€250

€200

€150

€100

€50

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

7 Q1 2023 EUROPEAN VC VALUATIONS REPORT OVERVIEW

 Late-stage VC deal value (€M) dispersion by quarter
€50

€40

€30

€20

€10

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Venture growth robust deals are still happening, as evidenced by the strong
median venture-growth deal value showing. Venture-growth
The median venture-growth valuation fell to €25.3 million companies will typically have larger capital requirements
in Q1 2023, representing a 40.9% decline from Q1 2022. given their age and size, which will drive up deal sizes.
In contrast, the median venture-growth deal value rose However, with growth rates and capital availability declining,
to €9.9 million, a 19.9% increase from Q1 2022. Record- valuations and deal sizes may come down further in 2023.
breaking valuations figures are unlikely in 2023. However,

Venture-growth VC pre-money valuation (€M) dispersion by quarter

€1,600

€1,400

€1,200

€1,000

€800

€600

€400

€200

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

8 Q1 2023 EUROPEAN VC VALUATIONS REPORT OVERVIEW

 Venture-growth VC deal value (€M) dispersion by quarter
€180

€160

€140

€120

€100

€80

€60

€40

€20

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Up, down, and flat rounds Moreover, the lack of valuation disclosure could be artificially
inflating valuations based on the higher valuations tied to
In Q1 2023, the proportion of down rounds ticked upwards large rounds that have closed in recent years. VC is an illiquid
to 18.8%, having finished 2022 at a decade low of 15.3%. strategy, and valuations are linked to static VC rounds.
Although the proportion is trending upwards, it is worth Therefore, the further we progress through the downturn and
noting that investors and startups are not required to disclose more companies are forced to secure capital and potentially
valuations when announcing a round. Therefore, several announce haircuts, the more accurate the valuation and down
recently completed rounds could be flat or down rounds. round landscape will become.

VC down rounds as a share of all VC deals

30%

25%

20% 18.8%

15.3%
15%

10%

5%

0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Source: PitchBook • Geography: Europe
*As of March 31, 2023

9 Q1 2023 EUROPEAN VC VALUATIONS REPORT OVERVIEW

 SECTORS

Fintech
Median fintech VC pre-money valuation (€M) by stage
€120

€100

€80

€60

€40

€20

€0
2018 2019 2020 2021 2022 2023*
Angel Seed Early-stage VC Late-stage VC Venture growth
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Fintech deal sizes and pre-money valuations grew, but to suffer the most, with median venture-growth pre-money
challenging times remain ahead. Median early-stage valuations for fintech companies down 59.7% in Q1 2023
fintech pre-money valuations grew to €22.1 million in Q1, versus 2022 levels. We expect valuations within the sector
pacing above the 2022 value of €13.8 million. The median to continue to come under pressure and have started to see
early-stage deal size is also pacing 22.7% higher than evidence of this with TriplePoint Venture Growth reportedly
2022’s figure, alongside angel and seed. However, despite lowering the value of its stake in Revolut by 14.9% in March.
this seeming resilience in deal activity, the data may lag This was followed by Schroders decreasing its valuation for
recent market dynamics as challenges continue to unfold the same by 46.4% in April. The fund also marked down its
amid rising interest rates. Late-stage companies are likely stake in mobile banking application Atom Bank by 31%.1

1: “Revolut’s Valuation Cut by Shareholder TriplePoint: Telegraph,” Bloomberg, Andrew Davis, March 4, 2023.

10 Q1 2023 EUROPEAN VC VALUATIONS REPORT SECTORS: FINTECH

 SECTORS

Energy
Median energy VC pre-money valuation (€M) by stage
€60

€50

€40

€30

€20

€10

€0
2018 2019 2020 2021 2022 2023*
Angel Seed Early-stage VC Late-stage VC Venture growth
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Q1 2023 saw mixed movements in energy sector captured on a quarterly basis. However, supply chain issues
valuations, as some heat seems to have been taken out of within the sector haven’t fully resolved, nor do we think
the market. 2022 marked a record year for investment into investment in long-term, cleantech solutions will fall out of
private energy ventures as the Russia-Ukraine war brought favour. We therefore expect deal activity for technologies
to light supply chain issues and the need to transition that need multiyear implementation to stay resilient
into alternative energy more quickly. This resulted in through the year. This was evident in Q1, with the median
unprecedented levels of investment and therefore peak seed deal value pacing 96.0% above 2022 levels, at €3.3
valuations for such European companies. In Q1 2023, we’ve million, and the median early-stage VC deal value pacing
seen a marked correction from this peak, with the median 70.9% above, at €9.4 million. Anecdotally, German solar
late-stage pre-money valuation down 68.9% compared installer unicorn Enpal also raised €215 million in its Series
with 2022—although we acknowledge that less data is D, taking its post-money valuation to €2.4 billion.

11 Q1 2023 EUROPEAN VC VALUATIONS REPORT SECTORS: ENERGY

 Regions
Quarterly median VC pre-money valuation (€M) by stage for UK & Ireland
€35 €32.1

€30

€25

€20 €17.7
€16.3
€15
€10.3
€10 €5.1
€6.6
€4.9
€5 €3.5

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022 2023*
Angel and seed Early-stage VC Late-stage VC Venture growth
Source: PitchBook • Geography: UK & Ireland
*As of March 31, 2023

In the UK & Ireland, deal activity showed encouraging pre-money valuations decreased 28.6% and 30.1% from
signs at the start of the year. Median pre-money Q1 2022, respectively, with only angel and seed stages
valuations were broadly up in Q1 2023, with the late stage increasing—to €3.8 million compared with €3.5 million
increasing 24.6% from Q1 2022. Elsewhere, median angel in Q1 2022. Whilst early- and late-stage valuations were
and seed-stage pre-valuations rose 9.7%, and venture lower, sequential upticks in the quarter for both stages
growth increased 6.4% in Q1 2023 compared with Q1 could indicate the worst of the correction is behind us.
2022. However, early-stage deal sizes decreased 9.6% YoY However, deal size remains subdued, with the median
in Q1. Overall, improved economic and political stability deal value for the early and late stages down 25% and flat
in UK markets seems to have supported YoY recovery in QoQ in Q1 2023, respectively. It therefore remains to be
valuations and deal sizes. seen if deal activity in the region will remain challenged
or if trough levels have been reached and thus recovery in
In France & Benelux, valuations seem to have stepped activity could ensue through the year.
down more in Q1 2023. Median early- and late-stage

12 Q1 2023 EUROPEAN VC VALUATIONS REPORT REGIONS

 Quarterly median VC pre-money valuation (€M) by stage for France & Benelux
€14

€12

€10
€8.7

€8 €7.2

€6 €4.8 €5.0

€3.3 €3.8
€4

€2

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022 2023*
Angel and seed Early-stage VC Late-stage VC
Source: PitchBook • Geography: France & Benelux
*As of March 31, 2023

13 Q1 2023 EUROPEAN VC VALUATIONS REPORT REGIONS

 Nontraditional investors
Median early-stage VC pre-money valuation (€M) with nontraditional investor participation
€12.0
€12

€10
€8.1
€8

€6 €5.5
€4.8

€4

€2

€0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Nontraditional investor participation No nontraditional investor participation
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Nontraditional investor involvement continues to decrease remain of how much more attrition this investor base may
following COVID-19’s peaks. Deal value with nontraditional have in venture deal activity and if we have reached trough
investor participation continued to decrease, falling 65.3% deal value. Alongside market conditions, valuations in private
YoY in Q1 2023 and marking a new trough since the peak in markets will likely be a key determinant of the answers. For
Q4 2021. Nontraditional investors’ appetite in VC has clearly instance, recent capital inflows in VC by major nontraditional
waned as macroeconomic pressures have increased, and investors, such as asset managers and PE funds, through
market uncertainty has heightened. However, the questions direct investment in deals will have been restricted due to

Quarterly VC deal activity with nontraditional investor participation

1,329 1,376 1,444 1,301

1,351
1,196
1,083
1,004
1,047 1,005
904 927 924 935
877 845 859 852
806
756 799
€20.6

€23.6

€23.6
€23.5

€23.5
€10.2

€15.4
€19.5

€12.2
€11.3
€8.0
€4.8

€8.4
€6.4

€8.2
€5.6

€7.2

€5.7

€7.2
€6.3

€7.3

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022 2023*

Deal value (€B) Deal count

Source: PitchBook • Geography: Europe
*As of March 31, 2023

14 Q1 2023 EUROPEAN VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

 Deal activity with CVC participation as share of all European VC deal activity
50%
44.5% 45.2%
45%

40%

35%

30%

25%
21.2% 21.0%
20%

15%

10%

5%

0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*

Deal value Deal count

Source: PitchBook • Geography: Europe
*As of March 31, 2023

a denominator effect. This means there has been an over- outflows from private investments to be more evident in
indexation of capital to private markets as public asset venture growth, thus leading to more pressure on deal values
values in fund allocations decline. If and when VC valuations here compared with other stages.
catch up to public assets, we could potentially see an uptick
in nontraditional investor participation again as exposures Within the nontraditional investor base, corporate venture
to private assets rebalance. However, given increased capitalists (CVCs) continue to hold the lion’s share, with
uncertainty in current markets, the same level of risk appetite deal value resilient. In Q1 2023, 45.2% of European VC deal
and therefore participation from such investors is unlikely to value consisted of deals with CVC participation, pacing
match recent years. slightly above 2022’s 44.5%. Deal activity for CVCs appears
to be somewhat resilient, with the median deal value in
Venture-growth stage drives decline in median deal Q1 2023 at €5.5 million, 21.4% higher than 2022 levels.
values with nontraditional investor participation. Whilst Median pre-money valuations for CVC investments follow
deal values across most stages saw marginal movements the same trend, up 31.9% in Q1 compared with 2022. The
compared with 2022, Q1 2023’s median venture-growth deal category could remain resilient as strategically, corporates
value is pacing well below 2022—at €11.3 million compared are unlikely to face the same denominator effect felt by
with €22.7 million. This is somewhat expected as venture other nontraditional investors when determining portfolio
growth saw the largest level of activity during 2021 to 2022 exposure to private assets. CVCs also often have more
from nontraditional investors entering VC to gain exposure to specialisation and expertise in areas of VC. This means
long-term returns and portfolio diversification. Furthermore, the outlook for corporate investment into VC may be more
deal sizes tend to be larger when nontraditional investors insulated than other nontraditional sources. However, we
are involved, as more mature companies align with their expect a tougher trading environment and tighter internal
investment expertise. Looking forward, as near-term liquidity budgets to still limit overall spending into new ventures.
needs are prioritised, we expect nontraditional investors’

15 Q1 2023 EUROPEAN VC VALUATIONS REPORT NONTRADITIONAL INVESTORS

 Unicorns
Unicorn count and aggregate post-money valuation (€B)
140 €500
128 128
€450
120
€400
100 €350

€300
80
€250
60
48 €200

40 €150

€100
20
€50
2
0 €0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Aggregate post-money valuation Cumulative unicorn count New unicorn count
Source: PitchBook • Geography: Europe
*As of March 31, 2023

In Q1 2023, flatter valuations were evident as the In Q1 2023, London-based payroll provider PayFit
aggregate post-money valuations of all Europe-based reportedly cut 20% of its workforce, 14 months after
unicorns (companies with a post-money valuation of €1 securing €254.0 million at a €1.8 billion post-money
billion or more) levelled off at €471.2 billion. Although valuation. 2 The announced layoffs are not isolated, and
the figure will fluctuate throughout the year, the figure companies that have secured strong valuations at the peak
registered in Q1 is 0.3% lower than the full-year figure from of the market will struggle to justify large step-ups during
2022. Markers of a cooler market have been apparent, and the current downturn. We anticipate that businesses with
we expect substantial rounds at lofty valuations to be rare high capital demands will require capital management in
in 2023. In fact, we anticipate further downward pressure upcoming quarters as emphasis has shifted towards capital
on valuations as capital availability shrinks and businesses efficiency and away from growth at all costs.
explore flat or down rounds over the next few quarters.
The challenging environment was illustrated in Q1 2023
Mature VC-backed companies have scaled impressively as deal value and count for unicorns fell 87.5% and
in recent years; however, challenges are on the horizon. 65.5% from Q1 2022, respectively. With significantly less
With publicly listed companies struggling to maintain share dealmaking among unicorns taking place, less cash will
prices, operating margins, and growth rates, we expect be available to inject into business models to promote
similar conditions to affect major VC-backed companies. growth. Therefore, steep valuation growth is unlikely until
Although VC is illiquid and problems may be resolved fresh rounds tied to higher valuations are completed. We
away from the scrutiny of quarterly financial reporting believe that unicorn dealmaking will remain quiet in 2023,
requirements, reports of internal valuation discounts, with consumer and business spending stalling as inflation
layoffs, and reduced spending to extend runway have persists. Reports of stress on valuations at companies
increased. Unicorns with high burn rates could be the including Checkout.com, Klarna, and Revolut could spread
first to show signs of duress if recent costly investments deeper into the VC ecosystem as the macroeconomic
combined with current market conditions hamper growth. picture becomes increasingly difficult to navigate.

2: “Payfit to Part Ways With 200 People, or 20% of Its Workforce,” Tech.eu, Dan Taylor, March 1, 2023.

16 Q1 2023 EUROPEAN VC VALUATIONS REPORT UNICORNS

 Bottlenecks from the muted VC exit environment may new funds to finance companies. Although it is a more
also create future capital cycle issues. As discussed in our common strategy in PE, VC secondaries could become an
Q1 2023 European Venture Report, capital deployed into alternative liquidity option for LPs. Returns in VC are highly
startups from VC funds significantly outstripped capital concentrated among a small selection of outlier companies
raised by VC funds in 2021 and 2022. A prolonged period of within the portfolios of a few top-performing GPs.
fewer exits will harm near-term returns and could prevent Therefore, aging companies may face renewed pressure to
LPs and GPs from rolling over capital distributions into exit unless liquidity options pick up.

Unicorn VC deal activity

89
86

38

27

15 16 14
12 10
5
2
€0.8 €1.6
€0.5 €2.3 €2.3 €3.1 €5.6 €7.5 €27.0 €23.0 €1.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Deal value (€B) Deal count
Source: PitchBook • Geography: Europe
*As of March 31, 2023

Unicorn count and average post-money valuation (€B)

128 128

85

51
39

19 22
11 15
5 5 €2.4
€2.0 €2.0
€1.9 €1.7 €1.5 €1.7 €2.1 €3.5 €3.7 €3.7

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*

Average post-money valuation Unicorn count

Source: PitchBook • Geography: Europe
*As of March 31, 2023

17 Q1 2023 EUROPEAN VC VALUATIONS REPORT UNICORNS

 Liquidity
Quarterly VC valuation at exit (€M) dispersion
€900

€800

€700

€600

€500

€400

€300

€200

€100

€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021 2022* 2023*
Top and bottom quartile range Top decile Median Bottom decile Average
Source: PitchBook • Geography: Europe
*As of March 31, 2023

A tale of two strategies: exit valuations continued to activity as the bid-ask spread narrows, thereby enabling
fall YoY, while acquisition activity was resilient but corporates to carry out buy-and-build strategies. Recent
public listings were subdued. In Q1 2023, the median examples of this include Dell acquiring Cloudify for €93.5
exit valuation decreased 34.8% YoY but grew 48.5% million to build out its cloud services business, and Via
QoQ. Several moving parts exist here depending on acquiring Citymapper for a similar amount to expand
exit strategy, where sequentially, acquisition exit value its transportation technology offering. Looking forward,
increased but public listings decreased. For the former, corporate entities with both scale and balance sheet
the median valuation increased nearly threefold QoQ to firepower will be best placed to capitalise on buying
€29.6 million, whereas public listing valuations declined opportunities in the market.
47.1% sequentially, but YoY showed some signs of recovery.
Overall, we would expect acquisition-led exits to take On the other hand, listing counts remained subdued in Q1.
share from public listings through the year, as valuations in Despite some recovery in valuations, the outlook is still
public markets remain subdued and depressed asset values uncertain. 3 Within this, the median valuation increased
create opportunities for buyers. 5.8% quarterly YoY to €42.7 million, which could indicate
some respite in public markets. In Q1 2023, the Eurostoxx
The sequential uptick in corporate acquisition values could 600 Index increased 6.5% with a few public listings in the
be explained by the increasing buying activity in the wake quarter, albeit not from VC-backed companies (Lottomatic
of recently depressed asset valuations. Although QoQ and TMP Group). As the count is low, we are hesitant to
median acquisition sizes have increased in Q1 2023, they extrapolate these trends into the rest of the year as public
are still pacing 14.1% below 2022’s level, thus evidencing listing activity remains uncertain. Overall, we believe public
that valuations are still depressed. As private markets track valuations are unlikely to fully recover, which means listings
public markets at a lag, we expect further markdowns will stay depressed and liquidity pipelines for late-stage
through the year. This should lead to continued buying companies will remain challenged.

3: Note: Our data captured only four public listings with disclosed valuation figures in Q1 2023, the lowest count since 2020.

18 Q1 2023 EUROPEAN VC VALUATIONS REPORT LIQUIDITY

 VC exit activity is likely to remain challenged throughout thereby limiting exit opportunities for larger companies.
the year, with smaller exits more insulated. Acquisitions This could increase the demand for smaller transactions,
will likely take share of exit activity as public markets which can be financed by cash and stock. As options for
remain muted and the macroeconomic outlook remains larger entities such as LBOs or public listings are likely
uncertain. Higher rates mean conventional strategies such to remain limited, late-stage players will still need to be
as leveraged buyouts (LBOs) may continue fall out of favour, prudent with costs and cash burn despite scale advantages.

Median public listing and acquisition exit valuation (€M), with YoY change
€80.5 200%

€70.5 150%

€60.5 100%

€50.5 50%

€40.5 0%

€30.5 -50%

€20.5 -100%

€10.5 -150%

€0.5 -200%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023*
Public listing median Acquisition median Public listing YoY % change Acquisition YoY % change
Source: PitchBook • Geography: Europe
*As of March 31, 2023

19 Q1 2023 EUROPEAN VC VALUATIONS REPORT LIQUIDITY

Additional research
European private capital

Q1 2023 European Venture 2022 Annual European VC

Report Valuations Report

Download the report here Download the report here

Q1 2023 European PE 2023 Nordic Private Capital

Breakdown Breakdown

Download the report here Download the report here

More research available at pitchbook.com/news/reports

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