European Venture Funding Slows Further At Seed And Early Stage

Funding to European startups reached $16.4 billion in Q3 2023 — up by 28% quarter over quarter and flat year over year.

While the continent’s funding is up compared to the past three quarters, that increase is concentrated in late-stage funding, based on an analysis of Crunchbase data.

For seed and early-stage companies in Europe, however, both amounts and funding counts were at the lowest ebb since we began charting the downturn.

The largest region for funding in the third quarter in Europe was the U.K., followed by Sweden, France and Germany.

AI holds up
Late stage
Early-stage funding
Seed funding
Methodology
Glossary of funding terms
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AI holds up

Europe’s AI companies raised $1.8 billion in Q3 2023, representing 11% of the continent’s funding and close to one-fifth of global AI funding.

Large rounds were raised by U.K.-based driverless transport company Conigital, Berlin-based AI defense company Helsing, Paris-based AI infrastructure company Poolside, London-based AI for disaster recovery Tractable, and Germany-based consumer and industrial robotics developer Neura Robotics.

Let’s dive into the distinct trends by funding stage.

Late stage

Europe’s late-stage funding doubled quarter over quarter with notable funding raised in the sustainable energy sector across multiple markets. Large fundings were raised by:

Sweden-based H2 Green Steel, a steel production company using green energy;
Stockholm-based battery manufacturer Northvolt;
Verkor, another battery manufacturer, also based in France;
London-based battery storage company Zenobe Energy.

Early-stage funding

Europe’s early-stage funding totaled $4.5 billion in the third quarter, the lowest amount since we started tracking the downturn as of the third quarter of 2022.

The largest proportion of early-stage funding was invested in Series A companies.

Seed funding

European seed funding totaled $1.4 billion in Q3, down from $2.1 billion a year earlier.

The stage saw funding down around 25% quarter over quarter and 30% year over year — its lowest since the downturn.

However, European companies raised a larger proportion of global venture capital when compared to earlier this year — around 23% in Q3 as venture funding flattened in North America.

The pullback in venture has made a huge difference in how capital-efficient a startup needs to be, said Michiel Kotting, a partner at Northzone, one of the earliest venture outfits in Europe and a firm with offices across Europe as well as in New York. It is never a straight line for founders building a startup, he said.

The firm has experienced three significant downturns since its founding in 1996. Contrary to what you might think, a recessionary environment “does not make entrepreneurship harder or disfavor tech,” he said.

“If you only measure the success of tech companies by the amount of capital they’re able to raise, then things look really oblique right now,” he said, adding that if you look at the market share of companies being built, a 10x improved consumer experience means the markets are thriving.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of Oct. 3, 2023.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

We have made a change to how we include corporate funding rounds in our reporting as of January 2023. Corporate rounds are only included if a company has raised an equity funding at seed through a venture series funding round.

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)