PitchBook News - Why VC is booming in Europe

Also: Don't miss our 2021 annual report on US VC; Our healthtech analyst weighs in on Lyra Health's $235M round; Global M&A Report coming next week...
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The Research Pitch
January 22, 2022
In case you missed them, our flagship US PE and VC reports were released last week.

They combine to feature nearly 90 pages of data and analysis, helping you understand the trends of 2021 and what to expect in the coming year:
Why activity is booming in Europe's maturing venture ecosystem
2021 was a remarkable year for European VC.

Indeed, few could have predicted the heights to which the venture market across Europe and Israel would reach, with capital invested surpassing €100 billion for the first time.

A glut of outsized rounds and an increase in late-stage capital—which now accounts for 70% of total deal value—led to record numbers in 2021, as well as the continued participation from foreign and nontraditional investors.

In our 2021 Annual European Venture Report, we examine the key drivers that led to such a bumper year, analyzing activity across dealmaking, exits and fundraising, as well as regions.

Key takeaways include:
  • Despite expectations at the start of 2021 that investors would be more risk-averse, first-time rounds spiked to new highs as VCs became more confident in Europe's venture ecosystem.

  • Exit value more than tripled the previous record from 2018, totaling €142.5 billion, as investors and founders rushed to capitalize on favorable market conditions.

  • Although European VC funds swelled in size in 2021, the number of vehicles created sunk to its lowest level since 2013.
For more data and analysis, click to download our free 2021 Annual European Venture Report.

Feel free to reach out with any questions or feedback, or if you would like to discuss the research.
 
Best,

Nalin Patel
Senior Analyst, EMEA Private Capital
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European PE activity ballooned in 2021, setting annual records of all kinds
The European private equity industry is supersizing, having tripled in annual deal value over the past decade.

2021 was the best environment for PE dealmaking ever, characterized by strong leveraged lending markets, willing sellers, heightened dry powder, and massive stimulus.

The strength in dealmaking showed up across the board, especially within the IT, healthcare, and financial services sectors.

Bolt-ons were the dominant path to value creation, accounting for 65% of buyouts, a new annual peak.

The UK & Ireland was the standout region, doubling its pre-global financial crisis highs and growing its deal value 4x from a decade ago.
 
In Europe, unlike the US, buyout multiples declined in 2021.

European PE exits also roared to record highs in 2021.

GPs tend to be opportunistic when it comes to exit timing, and 2021 proved to be the hottest exit market on record, driven by the strongest IPO market ever.

Sponsors pursued public listings at a record clip, as the unprecedented stimulus drove public valuations north, lifted by public equity investors' willingness to pay outsized premiums for fast-growing private companies, powered in part by FOMO.

European PE fundraising slowed in 2021 but was still historically strong.

However, fund count saw a steep deceleration to its lowest total in nearly a decade, as LPs consolidated GP relationships and funneled more capital to their largest, existing, and more-experienced managers.

In 2021, the critical drivers of a healthy fundraising environment sustained, including low interest rates, record public market valuations, and public market volatility.

While the major concerns for LPs moving into 2022 will be higher long-term inflation, tightening policy, mountains of dry powder, and GPs' ability to put capital to work quickly, allocators remain positive on their private markets allocations, especially for buyouts and growth funds managed by GPs with a compelling equity story and strong track record.

For more data and analysis, click to download our free 2021 Annual European PE Breakdown.

Please feel free to reach out with any feedback or questions.
 
Best,

Dominick Mondesir
Senior Analyst, EMEA Private Capital
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Webinars & Events
What does 2022 have in store for European VC and PE after a record-smashing year?

What's the rationale behind our analysts' predictions around SPACs, carveouts, Nordic activity, and more?

This week, our London-based analysts discussed their outlook for all things related to European private capital: watch the replay
  • Feb. 2: What should we make of the explosion of US VC activity over the past year? Our quarterly Venture Monitor webinar will address the hard questions: register here
Deal Commentary
Healthtech analyst Kaia Colban weighs in on Lyra Health's $235 million funding round led by Dragoneer:

"Lyra Health's recent raise resulted in a reported $5.6 billion valuation, surpassing BetterUp's $4.7 billion valuation and making it the highest valued mental health startup we track in the mobile and digital retail behavioral health tech space.

"Behavioral health startups have received an influx of funding with $5.6 billion invested in 2021—outpacing the $779 million invested in all of 2020.

"The increase in investment has resulted from several opportunities stemming from COVID-19; employers have increased mental health benefits and consumers have turned toward digital mental health applications.

"We believe Lyra is a likely IPO candidate in 2022."

 
Kaia Colban

Emerging Technology Analyst
Healthtech
In the News
Our insights and data featured in the press:
  • The videogame industry has been riding a wave of consolidation and investment: M&A nearly tripled to $26.2 billion in 2021 and VC deals nearly doubled to a record $11.2 billion. [WSJ]

  • "It's all just wild." More tech startups crossed the $1 billion valuation threshold in 2021 than in the previous five years combined. [NYT]

  • A look inside crypto's plan to retool the internet, including $30 billion of VC investment in crypto-related projects like Web3 in 2021. [Bloomberg]

  • Over the past three years, the Big Five tech giants have acquired more than 100 companies and invested in dozens active in frontier technology. [The Economist]

  • Why aren't female founders getting a bigger piece of the pie? [TechCrunch]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.
ICYMI
Highlights from our other recent research:

Market updates Thematic research Emerging Technology Research Coming next week (subject to change)
  • Global M&A Report
  • Analyzing the rise of subscription healthcare
Thanks for reading! Feel free to email us any time with feedback, questions, or tips!

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