Venture Capital

Nontraditional investors shy away from European VC

For the first time in a decade, the proportion of European venture capital rounds with nontraditional investor participation fell in 2023 amid a broader correction in deal activity.

Some 3,567 VC deals in the region included the likes of CVCs, PE firms and hedge funds last year, according to PitchBook's 2023 Annual European Venture Report, representing 37.8% of the total number of rounds closed. This is slightly below 2022's annual percentage of 39.2%.

Nontraditional investor participation fell by 32.9% last year in line with the overall decline of European VC deal count, which was 30.5% lower than in 2022. VC deal value with nontraditional investor participation reached €41.9 billion ($45.6 billion)—a decline of 46.1% year-over-year.

The downturn in both the VC market and broader economies pushed nontraditional investors to reassess their risk appetite last year and adopt a more conservative approach in their investments.

These investors were most present in deals in the €1 million to €5 million range, but they did emerge in a handful of larger rounds. Defense tech startup Helsing's €209 million Series B featured Swedish aerospace and defense company Saab, while PE firm General Atlantic led a £280 million investment in dog food brand Butternut Box.

With a rebound in VC activity expected in 2024, and as valuations continue to come down, nontraditional investors are likely to pick up the pace of their investments as startups become more attractive. The AI boom could pull in more deals as corporates seek to acquire the latest technologies for their own business purposes.