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US venture capital fled Europe in Q1

Overall the level of European VC funding fell by 66 per cent YoY.

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European startup investment from venture capital funds fell sharply in the first quarter of 2023, led by a steep decline in the number of US VCs investing here.

2023 saw a year-on-year decline of 66 per cent and a quarter-on-quarter decline of 18 per cent, according to data from Crunchbase, with just $10.6bn raised by European startups.

That figure is the lowest seen since Q1 2020, when the global pandemic slashed European funding to just $9.9bn.

The downturn is hardly surprising and Europe is very much in line with the reductions in funding seen elsewhere. Globally venture capital funding was down 53 per cent year-on-year in the first quarter.

For Europe, Crunchbase identified several trends in the Q1 data, including a drop in late-stage funding, which is down 77 per cent to just $4.3bn on Q1 2022.

Another trend was a reduction in US VCs investing in Europe, with Francois Veron, managing partner at French VC Newfund, estimating that only around 5 per cent of Q1 deals involved US VCs, down from 40 per cent in 2022.

“There is a sense of going back to normal, but actually that will pinch the industry very much,” he said.

While the figures aren’t directly referring to fintech, they are of course highly correlated.

In the first quarter of 2023, we’ve seen a small handful of successful European fintech raises, like Raisin’s €60m Series E, Ledger’s $108m Series C extension, Lunar’s €35m raise and Apexx Global’s $25m Series B, along with talk of extending runways and job cutting.

There was a silver lining in Crunchbase’s data, with early-stage funding holding up most robustly during the downturn, showing a fall of just 7 per cent during the quarter to $4.7bn.

See Crunchbase's full Q1 2023 VC data here.

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