Q1’21 Venture Pulse Report

An overview of key findings uncovered from the Q1’21 Venture Pulse Report in Europe.

Europe-focused VC investment rose significantly in Q1’21, driven in part by a number of $100 million+ funding rounds, including a $1 billion+ raise by Sweden-based Klarna – in what was one of Europe’s largest VC funding rounds ever.

Fintech attracts major VC investment in Europe

Interest in fintech continued to accelerate in Q1’21, along with valuations for fintechs. In addition to Klarna’s raise, three UK based fintechs raised large rounds, including LendInvest ($381 million), Checkout.com ($450 million), and Rapyd ($300 million). With its $15 billion valuation, Checkout.com became the most valuable fintech company in Europe in January¹ before Klarna’s raise put it at a $31 billion valuation². Interest in B2B was also high as corporates looked to leverage fintechs not only to digitize products and enhance their customer experience, but also to improve their general operations.

VC investment in UK maintains strength

VC investment in the UK remained robust in Q1’21, driven in part by investors looking to deploy a significant amount of dry powder. The UK government continued to focus on enhancing its competitiveness post Brexit, with several reviews released in Q1’21. The Hill Review recommended changes to attract investment in UK-based businesses and to encourage listings on the LSE, including modifying listing practices to allow for dual class shares³. The Khalifa Review, meanwhile, recommended changes to improve the UK’s fintech sector.⁴

Germany sees record quarter of VC investment

VC investment in Germany rose to a new high in Q1’21 as investors remained focused on late-stage deals and follow-on investments. Interest in IPOs also increased, with a number of mature companies considering IPO and SPAC transactions. During Q1’21, car trading platform Auto1 held a very successful IPO, with its share prices rising 45% at opening⁵. During the quarter, Apple also announced plans to create a chip lab in Munich – an investment expected to strengthen the city’s innovation ecosystem. The German government also quick-started its $10 billion future fund – a new fund to help startups scale.⁶

Nordics region continues to gain steam

The VC market in the Nordics region continued to show incredible strength in Q1’21 as later-stage companies continued to grow and attract larger funding rounds. In addition to Klarna’s$1 billion raise and Wolt’s $530 million raise, Sweden-based sound platform Epidemic Sound raised $450 million during Q1’21. Corporate investment in the Nordics increased dramatically, reaching $2.4 billion in Q1’21, compared to $3.3 billion during all of 2020. During the quarter, Denmark-based consumer review site Trustpilot also raised $655 million in its successful IPO on the LSE. Other later-stage companies in the region have also begun to consider IPO exits, with the largest expected to target foreign exchanges such as New York, London or Frankfurt.

Here in the UK, B2B services is a fast-growing area of VC investment both for VC and CVC investors. We’re seeing more fintechs focusing on B2B services – offering everything from financial tools for SMEs to solutions focused on enhancing cash flow or managing accounting requirements. Given the number of local and global financial institutions looking to improve their legacy tech and infrastructure, I expect we will continue see significant investments in this space as we go through 2021.

Kevin Smith
Head of KPMG Private Enterprise in EMA, Global Co-Leader — Emerging Giants,
KPMG Private Enterprise, KPMG
Partner, KPMG in the UK