UK tops Venture Capital investment in Europe despite sharp decline in Q3

• UK VC investment fell by more than 50% in Q3 and is down by almost $2 billion compared to the same quarter in 2023.
• Despite sharp fall in Q3 investment, the UK secured the largest share of VC funding across Europe.
• Overall, global VC investment dropped from $95.5 billion to $70.1 billion in the third quarter.

UK Venture Capital (VC) investment dropped by more than 50% in Q3, falling from $7.1 billion to $3.4 billion, according to KPMG’s latest Venture Pulse report.

The sharp decline follows a strong second quarter for UK VC investment, which saw funding more than double in Q2 to $7.1 billion, up from $3 billion in Q1.

Despite the investment drop in Q3, the UK attracted the largest share of funding in Europe. 

Political uncertainty surrounding the UK and US elections has impacted investment over the last 12 months, as investors have wanted a clearer picture of the economic impact of election outcomes before making cash injections. This has meant that UK VC investment has dropped by almost $2 billion in the last 12 months, from $14.8 billion in Q3 23 to $13.5 billion in Q3 24.

London-based firms drew in almost three quarters of UK VC funding but KPMG’s latest report highlights growing interest in certain regions including Manchester, Edinburgh, Bristol, Nottingham and Cardiff. These are becoming more favourable to a range of firms looking to grow due to increasingly larger funding pots being aimed outside London and the ability to offer staff a different quality of life.

The majority of funded firms in Q3 were venture-capital based, with a small spike in angel-backed firms.

In terms of funding type, investment was almost equally split across seed round, early stage and later stage VC.

The largest share of funding went to artificial intelligence firms and the largest UK deal belonged to open payments firm Form3, which generated $220 million in Q3.

Nicole Lowe, UK Head of KPMG’s Emerging Giants practice, said:

“Despite a slow third quarter, the UK remained the leader in VC investment across Europe thanks to a strong mix of deal sizes and types across a wide range of sectors.

“It’s encouraging to see an investment landscape that, while still dominated by London, saw major gains for regional areas such as Manchester, Bristol and Cardiff.

“Looking ahead to Q4, we remain hopeful that investment will rebound while being mindful of major external factors such as the impact of the new Labour Government, the Budget and the US election.”

Global VC investment fell from $95.5 billion in Q2’24 to a nearly seven-year low of $70.1 billion in Q3’24, amid ongoing geopolitical conflicts, the continued exit drought, anticipated seasonal lulls in investment, and the uncertainty surrounding the upcoming US presidential election.

While the Americas continued to attract the largest share of VC investment globally in Q3’24, total investment in the region still fell from $58.6 billion in Q2’24 to $41.4 billion in Q3’24. In Asia, VC investment fell from $18.5 billion to $15.6 billion quarter-over-quarter. While in Europe it dropped from $17.9 billion to $12.5 billion, a level not seen since the pandemic.

Germany was the only major jurisdiction in Europe to see VC investment increase—from $2 billion to $2.4 billion between Q2’24 and Q3’24. Germany also accounted for three of Europe’s five largest deals during Q3’24.

With the US election looming large on the global stage heading into Q4’24, VC investment will likely remain subdued for most of the quarter as investors take a wait-and-see approach until the results are decided. AI will likely remain a hot area of investment, in addition to defense-tech given ongoing global geopolitical tensions.

There is a growing sense of optimism that exit activity is readying for a rebound, which would be very beneficial for the VC market globally heading into 2025.

 

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For more information, contact:

Rob Smyth
KPMG Press Office
E: rob.smyth@kpmg.co.uk
KPMG Press Office
Tel: 07548 115836

Follow us on twitter: @kpmguk

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