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After two years of dry investment, European technology startups are seeing new signs of growth as early-stage deal activity picks up and venture capitalists raise fresh funds.
Creandum, an early backer of Spotify, Klarna and Depop, announced a €500 million fund on Monday, becoming the latest Europe-focused private tech investor to secure new capital for startups this year.
The raise follows similarly sized deals including Accel Europe, which launched a $650 million fund last month, and Plural, a London- and Tallinn-based firm targeting “deep tech” startups, which raised €400 million in January.
Clendam's capital was raised in “record time,” according to general partner Carl Fridtjofsson, who said there was “a dramatic shift in sentiment, ambition and activity across the industry.”
Venture capital investment dried up and European startups were forced to cut costs after a tech investment frenzy fuelled by the coronavirus pandemic came to an abrupt halt due to inflation, rising interest rates and geopolitical tensions. Some of the biggest U.S. tech investors, including Tiger Global and Coats, have begun pulling out of European deals.
But venture capitalists say the market has begun to shift in the first few months of 2024, driven by a renewed enthusiasm for artificial intelligence startups and a strong rise in valuations for big Wall Street technology companies.
“The weight of the peak hasn't completely lifted, but there are green shoots all around,” said Tom Waymeyer, head of insights at Atomico, one of Europe's largest venture capital firms. “We're past the recovery stage and we're entering a period of growth again.”
Wehmeyer predicts that private tech investment in European startups will start to increase again this year after a dip in 2023. “The market is more active than at any point prior to 2021,” he said, noting that investment in “Series B” deals has risen for three consecutive quarters.
“From the data we see and the work we do every day, we're really looking forward to 2024,” said Sabina Withander, a partner at Stockholm-based Cleandom. “We expect more quality companies to [to raise money] It makes the funding environment more predictable.”
As markets have turned around in 2022, many startups have been forced to cut costs and focus on profitability. Investors say those that survived the funding freeze are now more sustainable and revenue growth has started to accelerate across the board.
Some Silicon Valley investors are also returning to Europe, with Andreessen Horowitz and IVP both opening offices in London in recent months.
Between 2007 and 2021, Creandum returned nearly seven times its investments in companies through stock sales, and one in six companies it has invested in has been valued at more than $1 billion.
John Biggs, a partner at Top Tier, one of Creandum's investors, said the figures show European venture capital groups can generate returns comparable to their Silicon Valley peers, a long-standing concern for investors in the region. “The company is at the top of global venture capital,” he said.
Not all of the European funds have had an easy time raising money. London-based Atomico is in the final stages of its biggest fundraise to date, targeting $1.35 billion across venture and growth funds, according to people familiar with the matter. But the process has taken more than a year, although the fundraising is expected to close in the coming months.
That reflects both the size of the deal and continuing investor wariness about funds aimed at later-stage companies at a time when successful initial public offerings have been few and far between, the people said.Atomico declined to comment on its fundraising plans.
