Venture Capital investment in Europe plummeted to a two-year low in the fourth quarter of 2022, amidst an environment of high inflation, rising interest rates, the ongoing war in the Ukraine, and skyrocketing energy prices.
That’s according to KPMG’s latest Venture Pulse report.
Compared to recent quarters, the largest deals in Europe during Q4 2022 were smaller.
They were led by three deals in the electric vehicle and mobility ecosystem — a $500 million raise by Sweden-based Einride, a $295 million raise by Sweden’s Volta Trucks and a $245.9 million rase by French battery producer Verkor.
“During Q4’22, VC investors across Europe showed increasing caution, putting a significant amount of pressure on their portfolio companies to cut costs and reduce their spend,” said the report.
“While mature startups undertook the most publicised cost-cutting measures in Europe during the quarter, primarily major headcount reductions and reductions in real estate, the later part of Q4’22 saw a wave of smaller VC backed startups starting to follow suit …
“The ongoing energy crisis in Europe continued to put a major spotlight on companies operating in the renewable energy and energy storage spaces, spurring strong investment in a wide range of companies.
“In addition to the large raise by Verkor, Estonia-based renewable energy infrastructure company Sunly raised $196 million, Belgium-based hydrogen energy company Tree Energy Solutions raised $128 million, and Norway-based renewable energy financing company Empower New Energy raised $74 million.
“Europe also saw significant investments in ESG and energy-adjacent businesses during Q4’22, including a $113 million raise by Norway-based Reetec—which manufactures minerals used in EV motors and wind turbines in an environmentally sustainable way …
“VC investment in Ireland remained steady quarter-over-quarter, led by an $81.6 million raise by Tines, a $35 million raise by Carrick Therapeutics, and a $12.8 million raise by Vaultree.
“The country was not, however, immune to industry cost-cutting—particularly from large corporates looking to reduce headcount and their global real estate footprint.
“In Q4’22, Meta announced plans to reduce headcount in Ireland by approximately 350 as part of a global initiative, and plans to scale back its EMEA headquarters in Dublin …
“The Nordics region continued to attract solid interest from VC investors in Q4’22 in terms on deal value, most prominently in the energy and electric vehicle space, despite a drop in total VC investment.
“In addition to Sweden’s Einride ($500 million) and Volta Trucks ($295 million), Norway-based food delivery platform Oda raised $151 million — although the latter was at a substantially lower valuation than the company’s previous funding round.
“Trends in the Nordics region are lagging a bit behind vs. for example the US. This could result in softer investment in Q1’23 as the VC market in the region sees more impact from the global downturn and the runways of the companies start to shorten …”