VC and growth-focused firms see exit and fundraising environment improving in 2025, EIF and Invest Europe survey finds

• Exit environment overtakes fundraising as VCs’ biggest challenge in 2024

• Over half of VCs see exits improving in the next 12 months, 45% see fundraising improvement

Brussels, Belgium, 22 October 2024 - Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, has joined forces again with the European Investment Fund, Europe’s largest venture capital investor, for the Venture Capital Survey 2024. The study highlights how exits have become the biggest challenge for venture capital in the past year, but that a majority expect a pick-up in activity in the next 12 months as interest rates fall and conditions for selling portfolio companies improve.

• Over one-fifth of venture capital managers said that the exit environment has become their no. 1 challenge, overtaking fundraising. The lack of private domestic LPs remained the third most cited challenge, followed by insufficient availability of scale-up financing. Over one-quarter of VCs said that the last 12 months had been negative for exits – albeit a large improvement from last year’s survey. However, GPs expectations turn positive for the next 12 months, with 52% predicting a better environment for exiting start-ups. As a result, sentiment towards fundraising also improves with 45% seeing better conditions for raising capital in the coming year.

• Insolvency or liquidation was the principal exit route for 29% for portfolio companies over the past year as funding conditions remained tight. Trade sales to strategic buyers continued to decline, accounting for 28% of exits, according to the 2024 survey, compared with 50% at their peak in 2022. IPOs and sales of listed stock shrank to just 4% of exits, well below historical norms. On the plus side, sales to private equity and other VCs picked up, accounting for 19% of exits.

Despite the headwinds to exits and fundraising, many GPs remain positive about the investment opportunities across Europe’s innovative and entrepreneurial landscape. One-fifth of respondents saw a positive investment environment over the past 12 months, with almost half of those surveyed positive about deploying capital in the coming year. AI, deeptech and cleantech are the most prevalent current and future investment themes, although venture capital appetite is wide-ranging with strong focus on digital health, the circular economy and biotech, among others.

Eric de Montgolfier, CEO of Invest Europe, commented:

“The European start-up ecosystem is at the heart of an innovative and competitive Europe. Despite continued headwinds in terms of exits and fundraising, the positive news is that VCs are continuing to find and fund exciting new businesses across tech and biotech. In addition to groundbreaking advances, these investments fuel growth, job creation, and returns for long-term investors, bringing a better tomorrow for all Europe’s citizens.”

“Clearly revealed is the need for further progress by venture capital managers in terms of diversity, given only half of GPs have more that 20% of their senior investment roles held by women, while over a third have no women on their senior investment team.”

The EIF and Invest Europe’s Venture Capital Survey 2024 explores the structural challenges facing the European VC market. More than 60% of VCs surveyed highlighted insufficient liquidity in IPO markets, followed by underdeveloped M&A markets. The challenges were closely followed by too few large-ticket buyers, and general difficulties in finding buyers, as well as insufficient market infrastructure for IPOs in Europe. Over half of companies that did achieve exits turned to non-EU buyers and stock markets, highlighting the need for deeper capital markets in Europe.

Access to funding for proven and growing start-ups was a further focus. Two-thirds of respondents deemed scale-up financing in Europe to be insufficient, while over half believed that conditions had deteriorated compared with the previous year.

The Venture Capital Survey 2024 drew its data from 398 venture capital GPs, providing a comprehensive and in-depth view of industry sentiment. Click here to read the report in full.

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Invest Europe is the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors. We have over 650 members, split roughly equally between private equity, venture capital and limited partners – with some 110 associate members representing advisers to our ecosystem. Those members are based in 57 countries, including 42 in Europe, and manage 60% of the European private equity and venture capital industry’s €1.15 trillion of assets under management. Businesses with private capital investment employ 10.9 million people across Europe, 5% of the region’s workforce.