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The European VC market is so hot it may skip its summer holiday

Even though Europe has a reputation for lengthy summer vacations, investors don’t expect much -- if any -- slowdown to come in Europe during this sun-drenched quarter.

The startup market is having a moment around the world, but few regions can brag as much as Europe when it comes to venture capital investment. Yes, the United States is putting up impressive numbers and Indian startups are booming. But Europe is such a bright spot in the larger world of private startup investment that it deserves more solo attention.

The data coming out of the continent is staggering: According to a Dealroom report, some €49 billion was raised by European startups in the first six months of 2021. That’s 2.9x as much as was raised by the region’s technology upstarts in the first half of 2020, and easily crests previous full-year records set in 2020 and 2019.

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The epic start to 2021 for European startup fundraising crushes any preceding year that The Exchange has data for, erasing concerns that the continent simply won’t be able to create breakout tech companies that compete globally.

There are other signals that things are red-hot in Europe, including the recent direct listing of Wise on the London Stock Exchange. The company was valued at a huge $11 billion price when it did so.

Rapid investment and big exits are now the norm out of Europe. Naturally, we wanted to learn more about where venture dollars may point in the future. What follows is a synthesis of market data and notes from Diana Koziarska, a partner at SMOK Ventures; Vinoth Jayakumar, a partner at Draper Esprit; Simon Schmincke, a partner at Creandum; and Javier Santiso, a partner at Mundi Ventures.

The picture that emerges is one of sustained optimism, an expectation that venture investment is going to blast through traditional lulls and sustain a rapid-fire cadence during the rest of 2021. Records shall be smashed. But inside the various superlatives, a few sectors may do better than others. And Europe’s comparative gains in the venture capital world aren’t without impacts. Let’s explore what data says about the first half of 2021 in Europe’s startup market, and what its in-crowd expects for the rest of the year.

Inside Europe’s epic start to 2021

The European startup market is putting up notable results for both early-stage and super-late-stage funding. Dealroom reports that in the first half of 2021, some €18.1 billion was raised by European startups in the form of rounds greater than €250 million. For reference, the entire European startup market raised €16.7 billion in the first half of 2020.

But there’s also solid data indicating that Europe is doing a better job than ever in getting smaller companies off the ground. The same Dealroom report indicates that while Europe has created 15% of new global unicorns since 2020, it created 20% of new Series A-stage startups and a huge 35% of seed-stage tech upstarts.

China, in contrast, is the opposite; the country has 8% of new unicorns since 2020, 6% of Series A-stage startups and just 3% of the world’s seed-stage tech upstarts.

The interesting China dynamic is repeated in other statistics. Dealroom reports that Latin American venture capital is up 5.5x on a year-over-year basis in H1 2021. Asia excluding China is up 2.3x, as is investment in the United States. In China, a far smaller 1.6x growth rate was seen in the half-year period. But inside that data is the fact that every region we just listed set records in H1 2021, while China posted a figure that was sharply down from prior peak results.

This shows that regions that see a boom in investment can later see declines. But at least in the near term, that doesn’t seem to be in the cards.

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