VC funding in Europe rose in Q3 2023, but favoured late-stage startups

In the third quarter of 2023, European startups raised $16.4bn (€15.6bn) in VC funding — a 28% increase quarter over quarter.

The findings are based on an analysis by Crunchbase, which also unveiled that the fresh capital has mostly favoured late-stage rounds. In contrast, funding for seed and early-stage companies hit its lowest points since Q3 2022.

Specifically, late-stage funding doubled quarter over quarter, reaching $10.5bn (€10bn) in total. Notably, VCs invested large sums in the sustainable energy sector, with big rounds raised by Sweden’s H2 Green Steel, battery manufacturers Northvolt and Verkor, and London-based battery storage startup Zenobe Energy.

Μeanwhile, seed funding added up to $1.4bn (€1.3bn), down from $2.1bn (€2bn) last year. Alongside its 30% year-over-year drop, it also fell by 25% quarter over quarter. Similarly, early-stage companies saw another low at $4.5bn (€4.3bn) with the largest amount of capital invested in Series A.

On the bright side, European startups have managed to raise a bigger proportion of global venture capital compared to last year. Their share reached approximately 23%, while VC funding in North America remained flat. Europe’s AI companies also accounted for close to one-fifth of the sector’s global funding, representing 11% of the region’s total capital raised in the past quarter.

Overall, Europe’s highest capital injection was concentrated in the UK, followed by Sweden, France, and Germany.

“The pullback in venture has made a huge difference in how capital-efficient a startup needs to be,” said Michiel Kotting, partner at Northzone, a London-headquartered multi-stage VC firm.

He noted, however, that the amount of capital raised isn’t the only measure of success for tech companies, adding that the economic downturn “does not make entrepreneurship harder or disfavor tech.”