PitchBook – European VC Valuations Report, 3Q 2023

In the PitchBook European VC Valuations Report for Q3 2023, it is noted that valuations are continuing to decline compared to levels in 2022, although there are signs of potential recovery. Median valuations have decreased in all stages of funding, with late-stage companies being the most resilient and venture growth companies being the least resilient. Deal sizes vary, with median venture growth deal sizes experiencing the highest decline and pre-seed deal sizes showing the greatest increase. The proportion of down rounds has increased compared to 2022, but it remained relatively stable from Q2 to Q3 2023. This suggests that there could be some emerging signs of market recovery. Nontraditional investor participation in European VC deals has decreased to 73.4% in Q3 2023, similar to levels seen in 2020. The decline in median valuations has been more significant when nontraditional investors are involved. Overall, it is expected that nontraditional investor participation will continue to decrease due to ongoing market uncertainty. The value and quantity of VC-backed companies valued at €1+ billion euros have plateaued in the first three quarters of 2023. Slower dealmaking and a lack of exits have contributed to this. Despite the challenging environment, the quantity of valuable VC-backed companies in Europe has increased over the past five years. However, valuations, especially in mature stages, are being scrutinized more closely. Investors are cautious in deploying their capital, and companies that were previously burning through cash have had to focus on cost-cutting, leading to recalibrated valuations based on slower revenue growth trajectories. Median exit valuations have also cooled down due to market conditions and lower growth expectations.