European venture capital flows decline by 20% in Q2

Europe’s venture capital investment fell by 20% in Q2, according to KPMG’s latest Venture Pulse report.

The decline was mainly driven by a sharp fall in UK venture capital investment, down by more than 40% from the previous quarter, partly as a result of Brexit.

“The outcome of the UK’s referendum to leave the European Union has introduced new uncertainties into the VC market ones that could linger in the quarters and years ahead. With no defined plan in place as of yet for an exit, however, most investors recognize that knee jerk reactions post Brexit are not the right solution,” the report reads.

Despite the drop in funding, deal activity in Europe climbed by 5% to to 385 for the quarter. After dropping sharply in Q1 2016, seed-stage deal share jumped back to 49% of all European deals, widening the gap versus other regions.

VC-backed companies in Europe have seen so far his year $6.3bn invested across 750 deals, which compares with a peak in funding and deal activity in 2015, with $14bn invested across 1600 deals (see image below).

Global deal activity fell to 1,886 deals, the lowest volume of deals since Q2 2013 – and down 6% from the 2,008 deals seen in Q1 2016. Financing ticked up 3% to $27.4bn, mostly buoyed by $1bn-plus rounds to “decacorns” such as Uber, Snapchat and Didi Chuxing. Decacorns refer to private investor-backed companies with a private market valuation of greater than $10bn.

The decacorn megarounds also lifted funding figures in North America and Asia – up 10% to $17.1bn and 3% to $7.4bn quarter to quarter, respectively. However, both regions saw noticeable declines in deal activity, with North America down 8% from Q1 while Asia fell 12%.

VC_KPMG

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