Q2’21 Venture Pulse Report – Europe

VC investment in fintech remained very strong across Europe, in part due to the growing mix of fintech companies attracting investment, from stock trading platform Trade Republic ($900 million) and digital insurance company WeFox ($650 million) to payments firm Mollie ($805 million), ‘buy now, pay later’ company Klarna ($639 million), and Starling Bank ($443 million). Even straightforward concepts such as BNPL are seeing companies introducing unique value propositions. In Q2’21, UK-based Zilch raised $80 million; Zilch provides BNPL direct to consumers by working with Mastercard, rather than with various e-commerce engines.¹

Despite Deliveroo’s rocky IPO ride, interest in public listings continued to grow in Europe, in terms of both IPOs and SPAC transactions. Q2’21 saw a number of successful IPOs, including Israel-based business productivity company Monday.com and Sweden-based plant-based milk company Oatly on the Nasdaq,² and UK-based cybersecurity firm Darktrace and fintech PensionBee on the LSE.

Maturing companies in Germany are also increasingly considering IPOs as an exit strategy, and are beginning to look at what they need to do in order to be successful. This is quite different than 12 to 24 months ago, when there was more modest IPO interest. One question raised, however, is whether IPOs will substitute for larger Series D and E rounds, or whether companies will remain private through later rounds before moving to IPO.

Interest in SPAC transactions also increased in Europe. During Q2’21, UK-based Babylon Health agreed to a SPAC merger with Alkuri Global Acquisition Corp,³ while Israel-based Innovid announced plans to merge with ION Acquisition Corp.⁴

After a record quarter of investment in Q1’21, VC investment in the UK remained high in Q2’21, driven in part by a strong COVID-19 vaccination program and businesses beginning to feel more certain in the post-Brexit world. Fintech and healthtech attracted the largest deals in Q2’21, including a $500 million raise by B2B payments firm SaltPay, a $444 million raise by AI-powered drug discovery company Exscientia, a $443 million raise by digital bank Starling Bank, and a $130 million raise by digital health company Huma. While later stage deals attracted the majority of investment, interest in earlier stage deals grew somewhat, with more businesses beginning to raise Series A and smaller rounds.

VC investment in Germany reached a new high in Q2’21, led by the $1 billion raise by business execution management company Celonis. With a valuation over $10 billion, the funding round made Celonis Germany’s first decacorn. Participation in VC deals has expanded in Germany and in other parts of Europe, with more participation by non-traditional investors, such as sovereign wealth funds. From an ecosystem perspective, Munich is quickly joining Berlin as a highly competitive tech hub, while ecosystems are growing in Cologne and Hamburg.

Investment in the Nordic region was incredibly strong in Q2’21, led by a $2.75 billion investment in battery maker Northvolt AB, a $639 million raise by fintech Klarna, and a $270 million raise by digital health company Kry. With the significant amount of dry powder available, numerous companies across sectors and across the region have been able to attract large funding rounds. While Sweden accounted for the largest deals in Q2’21, the rest of the Nordic countries also attracted impressive deals: Norway-based grocery platform Oda raised $264 million, Finland-based digital health company Oura raised $100 million, and Denmark-based drug discovery company ADCendo raised $60 million.

VC investment in Europe is expected to remain robust heading into Q3’21, particularly in areas such as fintech, healthtech, and B2B services, while investment in cybersecurity is expected to grow significantly.