US investors put $27.9 billion into European startups - Josh Loe

US investors put $27.9 billion into European startups


  • A record number of US institutions participated in at least one startup investment round in Europe in 2020.
  • The amount they invested European startups hit $27.9 billion, per PitchBook data.
  • PitchBook analyst Nalin Patel says European startups will continue to prove good value for US investors.
  • Visit Business Insider’s homepage for more stories.

US venture capital investors have been a growing part of the European tech ecosystem for some years, but 2020 was the biggest year yet in terms of deal participation. 

Traditionally deeper pocketed investors from Silicon Valley saw a value opportunity in European startups, which tended to be cheaper price-wise and funded less than US counterparts.

US investor participation in European startups grew 19.4% year-on-year to a new annual peak of €23.0 billion ($27.9 billion) in 2020, according to PitchBook’s annual European Venture Report

The last 18 months have heralded the arrival of Silicon Valley’s top tier funds into Europe. Early Snap backer Lightspeed Venture Partners, mega fund Sequoia Capital, New York’s Bessemer Capital, and Microsoft’s venture arm M12 have all made inroads into Europe in recent years.

That is slowly changing, with US investors participating in five out of the six largest deals in Europe last year, according to PitchBook’s data.

“European startups have sought out deep-pocketed US investors with the ability to ignite rapid international growth, said Nalin Patel, EMEA analyst at PitchBook. “Concurrently, some Europe-based startups serve as cheaper investment alternatives to highly valued US based startups.”

It’s not just deal volume but also the volume of investors that has increased recently. A record number of US institutions, 552, participated in at least one investment round in Europe in 2020, a 36% increase since 2016, according to Atomico’s State of European tech report for 2020

US investors haven’t just taken part in the big late-stage rounds, looking also at earlier-stage investments in areas such as fintech.

The below chart from CB Insight’s Q4 2020 State of Fintech report indicates that though US investors are increasingly looking at later-stage deals, more than 50% of deal activity has been around early stage startups.

CB Insights fintech stages

This chart shows the stages at which US investors invest in European fintech


CB Insights



Younger startups have felt the benefit too, with investors pouring a record €3.1 billion into first-time rounds in 2020.

This has been evidenced by hype around new, young companies in buzzy sectors. One delivery startup raised funding the same week it was incorporated in the UK at a $75 million valuation, despite having no revenue. 

Covid-19 has been a contributing factor to the rise of US investors in Europe in 2020, according to PitchBook’s Patel. He cites the success of remote working as a reason for centralized VC clusters like the Bay Area to disband in favor of potentially cheaper alternatives in Texas and Florida

“Consequently, US-based investors could re-evaluate where to invest to glean the most value, which could result in greater flows of capital into emerging European regions in 2021,” he said.

US VC deals

This chart shows the increase in deals in Europe with US VC investors involved.

Pitchbook


The consensus appears to be that Europe’s attractiveness shows no signs of abating with 60 or so companies valued at $1 billion or more (a unicorn valuation). 2020 saw the growth of breakout startups, such as virtual events company Hopin — which hit a $2.1 billion valuation in one year — and fintech startups like Klarna and Checkout.com gaining staggering new valuations. 18 new unicorns were created in Europe in 2020.



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