Europe sees a significant drop in venture capital exit activity in the first quarter
After a record high in 2021, subsidized exit activity from European companies fell dramatically in the first three months of this year.
The total exit value in the first quarter was 7.7 billion euros (about $8.1 billion) spread over an estimated 296 deals. If the current pace of exit activity continues, 2022 will be well below last year’s high of 125.7 billion euros.
“The exit market has been slow so far in 2022,” said Nalin Patel, chief analyst at PitchBook. “Exit flow is hampered as operators and investors adopt a wait and watch approach rather than risk an exit that could be costly and negatively impact the portfolio company’s valuation.”
Public menus suffered more than double the appetite for exits. Last year, a flood of venture capital-backed startups rushed into public markets to take advantage of the technological growth associated with the pandemic. However, with markets entering correction territory in the first quarter, Europe saw only 16 listings compared to 44 in the same period in 2021, according to PitchBook’s Q1 2022 European Venture Report.
The decline in the public listings was driven by higher interest rates, inflation and geopolitical concerns with Russia and Ukraine which prompted investors to flee high-growth technology stocks. Furthermore, the high benchmark ratings obtained in the frothy 2021 environment have become difficult to justify at the exit.
With the turmoil in public markets, acquisitions are likely to become more attractive to venture capital investors looking to exit. In the first quarter, a total of 144 such deals were concluded with a combined value of €5 billion. Low valuations of technology companies could prove to be attracting strategic acquirers looking to grow their offering.
Read more: Q1 2022 European Venture Report
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