VC & Exit Trends - France 2023

Europe Outpacing the USA in Post-Covid Resurgence

  The aftermath of the Covid-19 pandemic has propelled the global Tech sector into a tumultuous journey, with Europe emerging as a swifter and more robust player in the recovery.

 Commencing with a new gold rush from September 2020 to June 2022, an influx of substantial capital surged into the tech ecosystem. Heavyweight speculators, including Softbank, Tiger, Coatue, and others, were drawn by the scent of potential high returns, facilitated by cash nearly flowing freely due to negative interest rates.

   However, the narrative took a turn as inflation materialized, prompting central banks to swiftly raise interest rates. This catalyzed a sharp downturn in the valuation of public tech stocks, subsequently applying downward pressure on private tech valuations. The period from June 2022 to December 2023 evolved into one of the most challenging phases for tech companies globally, particularly those that secured capital during the gold rush at valuations that defied rationale.

  Currently, inflation in the US has dwindled to 3.1%, suggesting the potential for central banks to consider a reduction in interest rates in 2024. Notably, the BVP Nasdaq Emerging Cloud Index, a key indicator of public tech valuations in the US, exhibited an impressive +45% surge in 2023.

   These developments are interpreted as early signs of recovery, anticipated to fuel growth in VC fundraisings in 2024.

   However, the intriguing aspect lies in the contrasting trajectories of VC fundraising between Europe and the US. In Europe, there has been a notable resurgence with €45 billion raised, reflecting a substantial +30% increase compared to 2020. Conversely, the US total amount raised in VC remains below the 2020 level, with €130 billion as opposed to €160 billion in 2020 (-20%).

   Moreover, Q4-23 fundraising in Europe reached €20 billion, marking the highest since Q2- 22 and signaling a robust rebound from the nadir observed at €12 billion in Q1-23.

   A closer examination of the French landscape reveals stark disparities between sectors basking in hype, such as sustainability (Verkor, etc.), AI (Mistral, etc.), and deeptech (Aledia, etc.), and others, such as Fintech, which experienced an 80% reduction in the total amount raised in 2023.

Arthur Porré, Founding Partner, Jan. 5th, 2024