European venture capital valuations landed higher than expected in the first half of 2022, rising across all stages from last year’s figures.
This growth is unlikely to last as we head deeper into the year, with layoffs, down rounds and valuation haircuts expected to become more frequent given the current economic outlook.
Here’s a look at six charts from our Q2 2022 European VC Valuations Report highlighting how valuations fared in the first six months of the year.
The median early-stage valuation for H1 was €8.4 million, pacing 33% higher than last year. Early-stage startups have been relatively insulated from near-term volatility thanks to their distance from the public markets, and increased competition between investors at this stage has helped buoy valuations.
Overall, valuations for late-stage companies have remained positive, still tracking above 2021 numbers despite layoffs and weaker revenue growth for more mature businesses. As the year goes on, more late-stage startups are expected to cut their price tags as investors become more cautious about high valuations, which could lower the median valuation.
Down rounds ticked upward in H1, reaching 15.4% of deals closed compared with 14.8% in 2021. The percentage remains relatively low at the moment, but market conditions are expected to worsen, especially as a recession becomes more likely, and the proportion of down rounds could increase further.
Tech stock sell-offs and public market volatility have made venture an attractive asset class for nontraditional investors. Deal sizes including nontraditional investors increased across all stages in the first six months of the year with early-stage deals seeing the largest rise—43% higher than 2021.
The combined value of €1 billion-plus companies in Europe grew by 35% in H1 to stand at €378.6 billion. A lack of attractive exit options and a shift away from aggressive growth plans could see that figure stall as the year progresses.
Despite the exit market returning to pre-2021 levels, the median post-money exit valuation increased slightly from €40.2 million last year to €40.6 million. The rise was due to acquisition price tags trending upward, while the median valuation for companies exiting via a public listing dropped by 57% from 2021 to H1 2022.
https://pitchbook.com/news/articles/H1-europe-vc-valuations-chart
