Both VC investment and the number of VC deals in all jurisdictions fell to levels not seen since 2020 during Q3’22. The Americas saw VC investment fall sharply, from $76 billion in Q2’22 to $45 billion in Q3’22. Europe saw a similarly sharp decline, from $31 billion to $18 billion quarter-over-quarter. After experiencing a steep drop in Q2’22, VC investment in Asia fell even further—from $26 billion to $21 billion.
Globally, the energy sector was one of the biggest winners in terms of VC investment globally, with numerous companies around the world attracting large funding rounds. In addition to battery-maker Northvolt and electric vehicle infrastructure company TerraWatt’s $1 billion+ megadeals, US-based power development company TerraPower raised $750 million and China-based Gokin Solar raised $369 million. ESG more broadly also continued to attract VC investment in Q3’22, led by US-based carbon offset company Xpansiv’s $500 million raise.
Soaring energy prices driving attention to alternative energy
Skyrocketing energy prices in many regions of the world and growing concerns over energy dependencies helped drive investor interest in alternative energy options, energy storage, and mobility even higher in Q2’22. While electric vehicles and batteries continued to be a major focus for investment during the quarter, areas like hydrogen-based technologies also gained additional attention. Over the next few quarters, interest in other energy sources and solutions is also expected to pick up—such as the development of small-scale nuclear plants in Europe.
VC investment slows to $87 billion across 7817 deals
First-time financings remain resilient
Total exit value drops for 3rd consecutive quarter
Global fundraising on pace for near-record year
Top 10 deals globally spread among 5 different countries
B2B and energy attract big funding rounds in Europe
B2B-focused companies attracted major interest from VC investors in Europe during Q3’22, led by a $1.4 billion raise by Germany-based business productivity firm Celonis. Given the very real energy crisis in Europe exacerbated by the Ukraine conflict, interest in alternative energy and energy storage was also very high. The sector attracted a number of large deals, including a $1.1 billion raise by Sweden-based Northvolt—the second largest raise of the quarter in the region.
Nordic region bucks downward investment trend, driven by Northvolt and Klarna raises
Within Europe, only the Nordic region showed an increase in funding quarter-over-quarter, propelled primarily by two large deals: a $1.1 billion raise by battery maker Northvolt and an $800 million raise by buy-now-pay-later company Klarna. While VC investment in the Nordic countries remained robust, the number of deals dropped considerably in Q3’22. This highlights the growing polarization of funding in the region, with the strongest companies able to attract investment while others fall by the wayside.
Despite the degrading market conditions globally, the Nordics region continued to see strong fundraising activity in Q3’22. During the quarter, EQT Growth closed a $2.4 billion fund to support European growth startups,6 while Northzone announced a $1 billion fund focused on both Europe and the US markets.7
Trends to watch for in Q4’22
With geopolitical and macroeconomic uncertainty expected to continue, VC investors in Europe will likely become even more aggressive in their investment decision making heading into Q4’22. early-stage companies could feel the biggest impact, which could hinder the health of the deals pipeline long-term.
Energy and ESG are expected to remain hot areas of investment in Europe heading into Q4’22, particularly as they relate to alternative energy and battery storage. B2B is also expected to remain very attractive to investors, particularly as companies across the board focus on improving efficiencies and enhancing their profitability.
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Mia Duelund
Head of Markets & Communication - Central Services
KPMG in Denmark
