European VC Valuations Report
European Unicorn Market Faces Decline in Aggregate Value, Signaling Investor Sentiment Shift
The aggregate value of European unicorns has experienced a decline for the first time in over five years, signaling a shift in investor sentiment. The current aggregate post-valuation of Europe’s €1 billion-plus companies stands at €471.2 billion ($507.3 billion), representing a 0.3% decrease from the previous year. This decline is significant considering the consistent growth of at least 50% in aggregate value over the past five years.
The number of European unicorns has remained stagnant at 128, with no annual increase for the first time since 2012. This lack of growth, coupled with some companies losing their unicorn status, has contributed to the decline in cumulative value. Additionally, average unicorn valuations have slightly decreased due to down rounds and a decline in deal flow. In Q1 2023, these companies raised €1 billion across 10 deals, marking significant decreases in both deal value (87.3%) and deal count (65.5%) compared to Q1 2022.
It is anticipated that dealmaking among European €1 billion companies will continue to be sluggish, and the creation of new unicorns will be slower than in previous years. The cumulative valuation of these companies is unlikely to exhibit the same level of growth as before and may even contract further. The European VC market is experiencing contrasting trends, with valuations plateauing and tougher funding conditions emerging. Startups are facing challenges in securing financing, leading to extended due diligence processes and renewed scrutiny on revenues, valuations, and runways.
Late-stage VC investments saw a median valuation increase of 26.9% QoQ, with Germany-based Enpal securing a notable deal of €215.0 million at a €2.2 billion pre-money valuation. However, overall investment levels are being impacted by near-term uncertainty, although long-term opportunities are still sustaining activity. It is expected that late-stage valuations will flatten in the near future, with outlier companies potentially skewing figures.