Q4’24 Venture Pulse Report – Europe

A number of the largest raises in Europe this quarter occurred in the AI space, including GreenScale’s $1.3 billion raise, the $500 million raise by Insider, and a $370 million raise by UK-based Lighthouse.

With a number of laws and guidance under consideration — on top of the introduction of the EU’s AI Act, which was enacted as of August 2024 — players in the AI space in Europe have faced some uncertainty with respect to the rules they might need to abide by in the future; this uncertainty has likely slowed down some of the VC investment into the AI space in Europe, particularly in comparison to jurisdictions like the US.

VC investment in the UK picked up considerably quarter-over-quarter, although much of the increase can be attributed to the $1.3 billion raise by AI-focused GreenScale. The Q4’24 UK government Budget announcements, such as the decision to increase to the UK’s National Insurance Tax for employers, it is likely to further contribute to investor caution.

The fintech sector in the UK started to see some movement in the M&A space in Q4’24, including the pending acquisition of exchange platform Aquis by Six Group. The sector is well positioned to see additional activity heading into Q1’25. An increasing number of fintechs have also started down the path of IPO readiness, although many of these IPOs are not expected to materialize in the near term.

VC investment in Germany dropped to a 18 quarter low in Q4’24, driven by a range of economic challenges and other uncertainties, including the decision to call an early election. This pause will likely extend into Q1’25 as both startups and VC investors wait and see what the results of the election — scheduled for February 2025 — might mean for the innovation ecosystem.

Large deals were mostly absent in Germany in Q4’24; space technology company The Exploration Company attracted the largest deal in the country during the quarter ($160 million). While funding was limited in Q4’24, a number of sectors continued to see interest from VC investors in Germany, including B2B companies focused on enabling operational efficiencies, ESG reporting, and energy efficiencies, and companies focused on the semiconductors space.

With cost of capital high in Germany at the moment, some investors have also shifted their focus away from the VC market and towards safer alternative investments, while others have narrowed their focus to companies with proven track records or exceptional value propositions; this has led some startups to consider much less favourable terms in order to raise funds or to embrace alternative funding models, such as the use of venture debt.

The first half of 2024 was a particularly challenging time for the VC market in Austria, with a number of startups struggling to survive. After picking up a bit in Q3’24, VC activity saw a more noticeable rebound in Q4’24, with bigger rounds, more Series A rounds, and even some later stage deals — a trend expected to continue heading into Q1’25. VC investors in Austria showed particular interest in AI use cases, in addition to crypto and B2B solutions.

It was a quiet year for VC investment in the Nordics region. The region received only $5.5 billion of capital this year—a third of the amount raised during its 2021 peak. Large rounds were in very short supply with only a few exceptions. During the quarter, healthtech saw solid interest in the region, led by a $200 million raise by smart-ring company Ōura, while defense tech saw a good number of early-stage companies raising funding for both commercial and military applications. The energy and ESG space also remained hot despite Northvolt’s Q4’24 challenges; it is expected to remain a key sector of interest heading into Q1’25.

The Nordics continued to show its strength as a startup ecosystem; during Q4’24, Helsinki hosted the 16th edition of Slush, a very large event bringing record number of investors to meet entrepreneurs.

Year-over-year, VC investment in Ireland remained stable despite the challenging funding environment. Q4 ended strongly with several deals raising over $40 million each.VC investors continued to show interest in a wide range of sectors, from mature areas like health and biotech and fintech to emerging areas like AI applications. While interest in AI was quite high, deals in Ireland primarily occurred at the earliest deal stages during Q4’24; for example, Precision Sports Technology — a company focused on providing real-time feedback on exercise techniques — raised $1 million during the quarter.

While there continues to be a significant degree of geopolitical uncertainty in Europe, market conditions have been improving. Cuts to interest rates have helped fuel more positive market activity, a fact seen as quite promising for VC deal-making heading into Q1’25. AI will likely be one of the hottest areas of VC investment in Europe, even with concerns about evolving regulations, in addition to defense tech, energy and energy storage, and health and biotech. Cybersecurity will likely also see growing investment, particularly as AI-enabled cyberattacks become more prevalent.

If there are no major geopolitical incidents, 2025 could see more IPOs in Europe, particularly among the large crypto firms and digital asset players.