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The PitchBook report also showed a rise in Europe’s energy sector deals, while certain countries appear to have gotten a VC boost from Brexit.
The IT sector in Europe took centre-stage in venture capital (VC) deals last year, with the average value of these deals rising across most financing stages, according to a new report by PitchBook.
The company’s latest European Valuations Report found that VC investment in Europe showed a certain “robustness”, as the level of funding remained steady despite the mounting uncertainty in VC funding and the global economy.
In terms of sectors, IT showed a clear dominance as it accounted for almost half of all VC deals in Europe last year.
The software subsector in particular had a successful year as it accounted for nearly 4,350 deals. PitchBook said this was more than three times as many deals as any other IT subsector.
The value of VC deals into the IT sector increased across seed, early and late-stage funding, though the total number of IT deals declined compared to 2021.
PitchBook said this reflects the fact that last year saw “fewer but larger deals” across the overall VC ecoysytem in Europe.
The average venture-growth deal value declined by roughly 4pc compared to 2021 for IT, which PitchBook attributed to “how the global macroeconomic environment and its tumultuous 2022 affects the VC ecosystem at its different stages”.
Europe’s energy sector also saw growth last year in terms of its average VC deal value, with late-stage deals rising to an average of €7.2m compared to €4.2m in 2021.
PitchBook said the rise in the energy sector is likely due to Russia’s ongoing invasion of Ukraine, which has shaken up the energy market. The company also said there has been a push in the VC industry to invest in renewables and move away from fossil fuels.
A recent report into Europe’s deep-tech start-ups found that energy was one of its strongest sectors last year, with novel energy start-ups raising nearly 50pc more than in 2021 and more than three times the amount raised in 2020.
UK and Ireland decline
Meanwhile, the report also suggests some European countries are having a boost in VC deals as a result of Brexit.
The report shows that the pre-money valuation of companies has grown at a higher rate over the past five years compared to the UK and Ireland region.
It is unclear how much of the decline has impacted Ireland specifically, as the report highlights that the drop seems to be largely due to turmoil within the UK.
“In 2022, the UK went through three prime ministers and four chancellors of the Exchequer, the pound sterling fell to an all-time low compared with the US dollar, the Bank of England increased interest rates eight times, and inflation spiralled to a 40-year high,” the report said.
Rise in European unicorns
Last year, Europe saw 47 new unicorn companies emerge, which is the second highest figure on record according to PitchBook. This takes the cumulative unicorn count to 129.
PitchBook said the overall post-money value of European unicorns has grown from roughly €287bn in 2021 to more than €420bn last year.
“It has been encouraging for the industry to see the number of new unicorns rise despite the macroeconomic headwinds the global economy has faced in 2022,” the report said.
The IT sector also dominates this field, representing nearly 60pc of all European unicorns according to the report.
“However, because unicorns are not fully insulated from public markets, there were notable signs of a slowdown,” the report said.
“Average unicorn valuations dropped sequentially in 2022, starting from a record-high €3.6bn in Q1 and slowly dropping to €3.3bn in Q4 as the macroeconomic picture worsened through the year.”
Ireland added three more companies into its growing stable of tech unicorns last year, with Flipdish, Wayflyer and TransferMate all pushing past a $1bn valuation in 2022.
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