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05.1

Fundraising

European VC is beating US VC (and European PE), and outperforms now across two decades (1,3,5,10,15,20 year horizons), and appetite for the European venture capital asset class increased amongst LPs this year. Despite this, pension funds remain a relatively unrealised source of funding potential. In 2022, first time funds, Planet Positive and Deep Tech are key trends to watch.

Insights
European VC is beating US VC (and European PE), and outperforms now across two decades
European venture capital continues to be a highly attractive asset class - overperforming key comparables on a 1, 3, 5 and 10 year horizon and on par on the 15 year horizon.

LPs have kept up with the pace of a fast-growing ecosystem and are betting on first-time funds, but pension funds have unlocked potential
20% of funding was captured by LPs in H1 2021, up from 14% in 2020. However, European pension funds are lagging behind; with over $3T in total assets, their yearly investment in European venture represents less than 0.018% of their total. Raising that to 1% would have a seismic shift.

Investing in the future of the planet
LPs are most excited about investing in Planet Positive and socially responsible companies, especially via emerging fund managers. Deep Tech is a close second interest.
LP appetite for the venture asset class increases

Limited Partners ('LP') sentiment toward investing in the venture asset class has strengthened over the past 12 months, with 64% of respondents now reporting an increased appetite for it. Notably, only 2% of LPs report being less interested in the asset class. The change in sentiment represents a significant strengthening since last year, when only 31% of LP respondents reported an increased appetite for venture.

Has your appetite to invest in the European venture asset class changed over the past 12 months?

  • Increased appetite
  • Stayed the same
  • Decreased appetite
Notes
LP respondents only. Numbers may not add up to 100 due to rounding. The 2020 question is phrased as "Since the start of the Covid-19 pandemic..."

Source

LPs are now coming to the realization that to maintain the incredible returns the venture asset class can offer, they will need to be bolder and start developing conviction internally on certain sectors.

With the record breaking amount of capital flowing into venture as an asset class, we believe that specialization (sector, geographic or others) is going to be hugely important for firms to effectively compete and rise above the noise. Historically, LPs have had the mindset that we back managers specifically because we trust them to identify the promising sectors and spaces for us. But with the rise of specialist funds, LPs are implicitly making a bet on a given sector or space. That said, it’s important for GPs to be mindful of how narrowly defined your sector is. You want to be specialist enough to be differentiated in the ecosystem and provide relevant expertise, but also have enough latitude to make sure you can catch those outliers that will drive true outsized performance.

Thomas Moon

Sapphire Partners | Vice President

LP investing into European VCs is keeping pace with the ecosystem

LP activity is a crucial part of the European tech puzzle, as current allocations to the asset class fuel future VC activity and deployment cycles. Preliminary results for European VC fundraising in 2021 are encouraging, with activity in the first six months slightly ahead of H1 2020, at $8.8B raised (versus $7.8B). Some large funds closing in Q3 2021 – namely Index Ventures Growth VI, closing at $2B – are also set to contribute to a promising year. For comparison, European VC fundraising in 2020 also remained consistent with previous years, with over $18B of funds raised.

Overall VC funds raised ($B) per year, 2016 to H1 2021

Notes
Taken from the European Data Cooperative, developed by Invest Europe. EDC data converted at EUR:USD of 1:1.1856, the rate on 30 June 2021.

Selected examples of alternative fundraising models used by European VCs

2021 was also marked by several European VCs using alternative models to raise funds. For example, in March 2021, Passion Capital was the first European VC fund to invite retail investors to participate in its fundraising via crowdfunding platform Seedrs, albeit representing a very small share of the overall fund (£350k of a £45m fund). Forward Partners and Seraphim joined the ranks of publicly-traded VCs in 2021 as well. The former floated on the London stock Exchange via a £25M IPO and Seraphim raised £180M in July 2021. Molten Ventures, meanwhile, joined the main market of the London Stock Exchange and entered the FTSE250 in 2021 after a long successful run in the public markets since its initial IPO in 2016. It is worth noting that these alternative models to fundraising are not reflected in the data captured by Invest Europe.

Molten Ventures

The largest tech-only focused VC on the LSE with a market value of $1.9B. First listed in 2016.

Seraphim Space Investment Trust

Raised £180M in IPO on the London Stock Exchange's main market in July 2021.

Forward Partners

Went public on the London Stock Exchange's sub-market for smaller companies, AIM.

Passion Capital

A first in Europe: crowdfunded part of its $62M fund.

Whether you look at it from a returns perspective or the breadth of the opportunity set, European tech is one of the most exciting investment opportunities for institutional investors today.

European tech has proven to be a multi-trillion dollar opportunity, with the value of public and private companies growing to $3 trillion as of 2021. Looking ahead this value is set to grow at compounding speed fuelled by the acceleration of digital tailwinds to $6 trillion by 2030 at a conservative estimate. From a returns perspective, European VCs have consistently delivered strong returns to their investors - on par or exceeding their peers on the other side of the pond. The founders we see in Europe today have the best credentials yet - they have bigger ambitions, are more experienced and are better networked. The depth of talent and the size of the market opportunity provide strong foundations for European VC to continue to access the best companies and deliver world-class returns to investors.

Hiro Tamura

Atomico | Partner

UK VC funds are raised from the most distinct set of sources

Of all the European regions, venture capital in the UK and Ireland is raised from the most distinct set of LP types and with a relatively evenly distributed set of funding sources, including pension funds, fund of funds, sovereign wealth funds and corporate investors. UK VCs also have the lowest share (12%) of capital raised from government agencies of any region in Europe. By comparison, for example, the majority of VC funding raised in Central and Eastern Europe (52%) originates from government agencies.

Share of VC funds raised by GP region and LP type, cumulative 2015 to 2020

  • Academic institutions
  • Banks
  • Capital markets
  • Corporate investors
  • Endowments and foundations
  • Family offices
  • Fund of funds
  • Insurance companies
  • Other asset managers (including PE houses other than fund of funds)
  • Pension funds
  • Private individuals
  • Sovereign wealth funds
  • Government agencies
Notes
Taken from the European Data Cooperative, developed by Invest Europe. EDC data converted at EUR:USD of 1:1.1856, the rate on 30 June 2021.
Government agencies increase as a share of total VC funds raised

In the years 2018 to 2019, we saw a material change relative to the previous two years, as government funding decreased both for first-time and follow-on VC funds. In 2020 however, government funding reached new heights, and it now represents 30% of total VC funding. This is likely in part related to the pandemic, as governments were propelled into action in order to support their economies through Covid-19. It is, however, also likely a reflection of the increased scale and focus of government initiatives throughout Europe, including at a European level, to inject capital into the European tech ecosystem to support the development of the local investor ecosystem.

Evolution of share of government funding in Europe (%), per year range

  • First-time VC funds
  • Follow-on VC funds
  • Overall
Notes
Taken from the European Data Cooperative, developed by Invest Europe. Excludes Unclassified.
Government funding increased by almost $1B in 2020 versus 2019

In absolute terms, the total level of government agency funds invested into European VCs topped $4.2B for the first time in 2020, increasing from $3.2B in 2019. While government agencies have increased their investment into follow-on funds in the past year, the sums invested into first-time funds have stayed consistent over the past five years.

Evolution of government funding ($M), 2016 to 2020

  • First-time VC
  • Follow-on VC
Notes
Taken from the European Data Cooperative, developed by Invest Europe. EDC data converted at EUR:USD of 1:1.1856, the rate on 30 June 2021.
Founders are split on whether governments should invest directly in startups

Overall, sentiment towards the role that governments should play in direct investment into startups is mixed. Close to 50% of respondents in our survey said they do not think states should invest directly in European startups, though unsurprisingly, this is driven primarily by investors: 70% of VCs, 63% of angels, and over 50% of LPs indicate that states should not play a direct role. On the other hand, founders are much more evenly split on the question, with 41% saying states should play a role, and 42% saying they shouldn't. Given the market-driven competitive forces present within European tech investment, it remains to be seen how governments might develop a proposition for direct investment that is accretive to market dynamics and to founders; whether that be through a specialist focus on more purpose-driven capital, more patient financing, alternative risk/return expectations, or something else.

To what extent should states play a role in direct investment of startups in Europe?

  • States should not invest in startups directly
  • States should invest in startups directly
  • I don’t know
Notes
Numbers may not add to 100 due to rounding.

Source

$1B+ raised from global pension funds, but potential still unrealised

Pension funds, particularly those based in Europe, remain a source of mostly unrealised potential for the European venture asset class. Pension funds play a key role in household retirement across the continent, and represent around 20% of an average household's net financial wealth, according to a recent study by the European Central Bank. Over the past five years, funds raised from pension funds by general partners (GPs) more than doubled in Europe, with a peak of $1.8B in 2019. Interestingly, only around 50% of total funds raised by VCs from pension funds come from European pension funds specifically. Indeed, European pension funds invested less than $700M in total into European VC funds in 2020.

Pension funds committed ($M) to VC funds by LP region, 2016 to 2020

  • European LPs
  • North American LPs
  • RoW LPs
Notes
Taken from the European Data Cooperative, developed by Invest Europe. EDC data converted at EUR:USD of 1:1.1856, the rate on 30 June 2021. The data shows incremental amounts in each year for venture funds, not only final closing. Based on ECB Economic Bulletin (Issue 7/2020).
European pension fund capital allocation to VC in 2020 represents just 0.018% of their total assets under management

European pension funds have assets under management of more than $3T. This means that the close to $700M invested by European pension funds in 2020 is equivalent to just 0.018% of their total assets under management. This is the only chart in the whole report that would require us to use three decimal places in order to observe shifts in the data. By increasing their allocation of total assets to venture up to just 1%, the total amount invested each year would increase to close to $40B. This would represent a seismic shift, as it would be equivalent to more than double the total amount raised by European VC funds in 2020.

European pension funds committed to VC funds as a % of total funds raised and total European pension funds assets, 2016 to 2020

  • % total funds raised
  • % total pension funds assets
Notes
Taken from the European Data Cooperative, developed by Invest Europe. Based on incremental amounts in each year for venture funds, not only final closing. Pension fund statistics from ECB Statistical Data Warehouse.
UK & Irish pension funds are most underinvested

Amongst European pension funds, the most active LPs are based in the Nordics, France and the Benelux. Collectively, LPs from those sub-regions account for more than 70% of all pension fund allocations to European VC over the past five years. Nordic VCs, in particular, have benefitted from the progressive, pro-venture approach taken by local pension funds; pension funds represent almost 30% of all VC funds raised by VC based in the Nordics, more than 6x higher than the next region (DACH). Pension funds based in the UK & Ireland, by contrast, account for only 6% of total pension fund investments into European VC.

Share of total European pension funds raised by LP region, 2016 to 2020

  • % of total Pension funds raised
  • Pension funds as % total funds raised
Notes
Taken from the European Data Cooperative, developed by Invest Europe. Based on incremental amounts in each year for venture funds, not only final closing.
Meanwhile, European venture capital continues to be a highly attractive asset class

As an asset class, European venture capital continues to be highly attractive, overperforming key comparables on a 1, 3, 5 and 10 year horizon and on par on the 15 year horizon. At the same time, the delta of venture fund performance has widened between the top and bottom performers.

Given the 0% interest rate elsewhere, capital markets have discovered venture capital as an attractive asset class.

Also, the economy is still in the process of being digitized. This combination makes this a great time to build startups. Regarding completely new areas I am eager to learn how crypto and decarbonisation develop.

Angels have grown up in Europe. There is a rise in super angels. I see angel syndicates playing a very significant role in rounds, in some cases crowding out smaller VCs. In addition, successful angels are being backed by others, building syndicates or “deal by deal” funds. Given the abundance of capital, it is however also becoming increasingly difficult for angels with little understanding of the entrepreneurial process or of the specific industry to enter competitive rounds. Founders are turning from supplicants to requestors.

Gesa Miczaika

Auxxo Female Catalyst Fund | General Partner

North American LP investment in Europe fell in 2020

The flow of commitments from North American LPs to European VCs remains muted. Total commitments in 2020 actually fell on an absolute basis by 27%. The low total value of commitments means that trends are prone to material swings from one year to the next. For example, commitments from North American Fund of Funds grew by 2.4x in 2020 versus 2019, while commitments from North American pension funds dropped by half.

Capital invested ($M) by North American LPs by type, 2016 to 2020

  • Fund of funds
  • Pension funds
  • Corporate investors
  • Sovereign wealth funds
  • Endowments and foundations
  • Family offices
  • Other types
Notes
Taken from the European Data Cooperative, developed by Invest Europe. EDC data converted at EUR:USD of 1:1.1856, the rate on 30 June 2021.
Most LP respondents to our survey have a preference for emerging fund managers

LP respondents to the survey were asked to state the preferred types of fund managers they invest in, selecting any that applied from a selection including first-time fund managers, emerging fund managers or established fund managers. While LP respondents were most likely to select emerging fund managers as their preference, more than 50% of respondents stated an appetite to invest in first-time fund managers. There is also a meaningful share of LP respondents that are building a diversified portfolio of fund managers and indicated a preference to invest in fund managers from across all of these categories.

What type of fund managers do you normally invest in?

Notes
LP respondents only. Numbers do not add to 100 as respondents could choose multiple options.

Source

$1 in every $5 VC funds raised is going to first-time funds

There has been an uptick in the amount raised by first-time VC funds in H1 2021, with close to 20% of all funds raised captured by first-time funds, up from 14% in 2020. In absolute terms, first-time VC funds have raised more during H1 2021 compared to H1 2020, while funding for follow-on VC funds is currently tracking slightly behind last year's totals.

VC funds raised ($M) by fund type, 2019 to H1 2021

  • 2019
  • 2020
  • H1 2021
Notes
H1 2021 figures are preliminary. Taken from the European Data Cooperative, developed by Invest Europe. EDC data converted at EUR:USD of 1:1.1856, the rate on 30 June 2021.
Small funds account for the largest volume of new funds

The number of larger funds (>€250M) raised each year in Europe remains small and also subject to fluctuation. In 2020, just 14 funds of greater than €250M were closed during the year. During the first half of 2021, the number of largest funds closed has totalled just five. In comparison to the frequency and scale of megafunds raised in the US, Europe remains on a different footing. Smaller funds (<€25M) continue to account for the largest volume of new funds closed each year with 2021 on track to break another record in terms of total VC funds raised by these micro funds. This pool is also now starting to include a new generation of 'solo GPs' that are breaking out on their own to raise dedicated pools of capital from external investors, including institutional LPs, to invest on an individual basis. As the rate of 'talent recycling' within the European investor community accelerates, this should further propel this trend in Europe.

VC funds raised ($M) and number of VC funds closed per year by fund size (€M)

  • 2017
  • 2018
  • 2019
  • 2020
  • H1 2021
Notes
H1 2021 figures are preliminary. Taken from the European Data Cooperative, developed by Invest Europe. EDC data converted at EUR:USD of 1:1.1856, the rate on 30 June 2021. The data shows incremental amounts in each year for venture funds, not only final closing.

While the relative scarcity of capital continues to be an issue in Europe, due to the paucity of large private institutional investors, the recent successes attract foreign and non-traditional investors - this is ominous.

I believe that over the last few years, the importance of geographic ecosystems (physical locations grouping together entrepreneurs, human resources, investors, service providers and clients) diminished. Existing ecosystems did not disappear, but success was proven possible starting from remote locations. In this context, Europe became the birthplace of significant successes and was recognized as an attractive location for starting and investing in future global leaders. While the relative scarcity of capital continues to be an issue in Europe, due to the paucity of large private institutional investors, the recent successes attract foreign and non-traditional investors. This is ominous as availability of capital clearly drives creation of startups and hence expands the top of the funnel for the future.

Dan Lupu

Earlybird Venture Capital | Partner

Examples of solo GPs

We have attempted to collate a snapshot of the new generation of 'solo GPs' that is emerging in Europe. It's exciting to see this growing cohort of former founders, operators and investors now focusing their efforts to build new, innovative models to support the next generation of European tech founders. Notably, the strongest cluster of these solo GPs is based in Germany.

Rodrigo Martinez

Madrid, Spain

Neil Murray

Copenhagen, Denmark

Connor Murphy

Berlin, Germany

Helery Pots

Tallinn, Estonia

Nathan Benaich

Europe and United States

Dec Kelly

Berlin, Germany

Andreas Klinger

Berlin, Germany

Maximilian Claussen

Berlin, Germany

Manuel Grossmann

Berlin, Germany

Nico Wittenborn

‘New York, United States

For too long, equity investment has been the only option for many innovative companies to obtain funding, often at very unfair terms. But really, raising money and giving up equity need not be the same concept.

We live in an age of empowered founders - empowered to choose what investor they want to work with and empowered to control their equity better. In the past, too many founders could not be incentivised to build sustainable long-term solutions to tough problems because at some point the equity math just didn’t make sense anymore - it can be tough to still feel real ownership when the stake in your business is minuscule compared to other investors around the table. If used sensibly, venture debt will strengthen innovative companies by significantly boosting business trajectory, protecting ownership and control of founders, as well as leaving more room to incentivise key talent, which in the current war for talent will be crucial for building lasting businesses.

Judith Dada

La Famiglia | General Partner

Network access is a top criteria for LPs

We asked LP respondents to our survey to select the most important criteria for considerations to back a GP beyond their performance/track record and strategy. The most frequently selected responses highlighted by LPs were network and relationships (53%), access to dealflow (45%) and strategic insights and expertise (43%). It is also of note that a focus on ESG was selected by 28% of respondents, while a focus on diversity and inclusion was only selected by 6% of LPs.

What are the most important expectations from the GPs you invest in beyond track record and strategy?

Notes
LP respondents only. Numbers do not add to 100 as respondents could choose multiple options.

Source

Capital allocators want more climate strategy

LPs and VCs generally believe the climate change mitigation strategies led by the European Union should be more aggressive. This poses the question: will they increasingly take matters into their own hands, and leverage the funds at their disposal to develop the solutions?

Do you think the European Union is aggressive enough / too aggressive (net zero in 2050) when it comes to combating climate change?

  • Not aggressive enough
  • About right
  • Too aggressive
Notes
Numbers may not add to 100 due to rounding.

Source

ESG and GP diversity and inclusion is becoming more important to LPs

Commitment to environmental, social and corporate governance (ESG) among LPs has increased since 2020, with 54% of them now stating that they have put in place ESG targets in respect to the funds they invest in. The number of LPs committing to targets to investing in woman and ethnically diverse GPs has also risen – though the share lags significantly behind those with ESG-specific targets. It is also notable that there has been a more pronounced increase in the number of LPs with targets for investing in woman GPs than those that have set targets for investing in ethnically-diverse GPs, despite an increased focus on discrimination against ethnic and racial minorities in tech gaining ground in the past year. The number of LPs setting KPIs in these areas is of course not a measure of the ultimate outcomes, but should at least drive greater awareness and focus on allocating capital to a more diverse set of GPs.

  • % who responded "yes" (2021)
  • % who responded "yes" (2020)
Notes
LP respondents only. Numbers may not add up to 100 due to rounding.

Source

I am more optimistic than ever about racial diversity in VC. However, it’s still very difficult for diverse founders to break out unless they’ve created wealth themselves by building companies and recycling capital later on.

In the UK, Marshmallow became a unicorn this year. Oja, led by a Black female founder, just raised $3.4m. VC funds are becoming more intentional in identifying diverse founders and seeing the opportunity there. We need more diverse managers and a more inclusive investment landscape. The ingredients are here to build a fairer ecosystem: Andy Davis is angel investing , Black Seed is building a seed ecosystem in Brixton, Impact X at the growth stage.But this needs to be amplified, with greater awareness, visibility and also greater capital commitments. We need talented diverse people in finance to see VC as a route. There are some great programs already like Included VC in Europe, which is increasing the diversity within the investment pool, or Future VC and the Newton Programme, providing a more global exposure to VC.

Rodney Appiah

Cornerstone Partners | Chairman and Co-Founder

VCs are more focused on impact

VCs respondents from funds of all sizes overwhelmingly indicated an increased focus on impact when assessing investment opportunities (73%) compared to 12 months ago. Respondents from larger funds (>€250M fund size) were more likely to respond that they have placed increased importance on impact with more than 80% of respondents agreeing with the statement.

To what extent do you agree or disagree with the following statement: In the last 12 months, the social and sustainability impact have become more important in our assessment of investment opportunities

  • Agree
  • Neither agree nor disagree
  • Disagree
Notes
VC respondents only. Numbers may not add up to 100 due to rounding.

Source

It is worth diving one step deeper, and looking at how selection criteria for fund managers vary between different stages. What we find is that at each stage, LPs prioritise the qualities that can differentiate fund managers among their peers. For example, LPs who primarily invest in first-time fund managers are most focused on tapping into a new network. What is also really striking is that those who invest across all types of fund managers and are therefore "fund managers agnostic" are also active participants in strengthening the VC landscape in Europe.

What are the most important expectations from the GPs you invest in beyond track record and strategy?

What are the most important expectations from the GPs you invest in beyond track record and strategy?
Half of newly raised venture funds have an ESG policy

Looking at new European venture funds raised in 2021, we found that overall, more than half of them listed either a sustainability statement or ESG policy on their website. Looking at the top ten countries by count of new funds, the disclosure level is on average above 50%, with a few exceptions in Spain, Switzerland and Poland - which trail behind on one or both measures. Finland and Belgium lead the way, with nearly all new funds listing both ESG policies and sustainability statements.

Count of newly raised European funds in 2021 with published statements on sustainability and ESG policy

  • Yes
  • No

The VC community needs to educate themselves on the problems that we are facing with the climate crisis and the various VC opportunities that have arisen in this space.

I am excited by the fact that investors are finally realising that positive impact and profit can go hand in hand. There is still work to do to educate ourselves on climate problems, and which can be solved by VC funding being more proactive in these spaces. We need to be aware of the changes in regulations that will accelerate the growth in this space as these will open opportunities to invest in less obvious Climate Tech startups, as well as areas such as deep tech, or slightly higher Capex companies that have not traditionally been easy for VCs to invest in. The VC community also needs to work closely with universities and researchers to ensure that we are more aligned to help needed solutions get to market quickly.

Heidi Lindvall

Pale Blue Dot | General Partner

A clear direction of travel in commitments to ESG and sustainability

Zooming in on the UK, which is home to the largest number of European VC funds, it's interesting to compare the implementation and disclosure of sustainability statements and ESG policies between those fund managers that have raised new funds during 2021 and the broader universe of established fund managers that have not raised a new fund in the past 12 months. What this shows is that fund managers that raised in 2021 have a greater likelihood of having these in place, especially in respect to the implementation of ESG policies. It's fair to speculate that the expectation of greater LP interest in these commitments is helping to drive a greater level of adoption within the GP community.

Share of newly raised versus existing UK funds with published statements on sustainability and ESG policy

  • New funds
  • Existing funds
Do you have a preference for generalist or specialist VC funds?

No preference


61%
of LP respondents said they don't have a preference for the type of VC funds they invest in

Source

Specialist VC funds


22%
of LP respondents said they prefer investing in specialist VC funds versus 17% who picked generalist VC funds

Source

LPs are excited about different themes, but purpose cuts through

When looking at which themes LPs find particularly interesting in European tech, Planet Positive stands out across the board.

What sector/theme would you consider as the most promising for venture capital investments in Europe in the near future?

Notes
LP respondents only. Numbers do not add to 100 as respondents could choose multiple options.

Source

LPs with preference for emerging fund managers are most interested in the health of the planet

Looking at the themes LPs see as most promising for VC investment in Europe by the type of fund managers they normally invest in, 53% of those LPs with a preference for emerging managers mention Planet Positive. This is closely followed by those with a preference for first-time and established managers at 47% and 48% respectively. Those investing in first time managers also express a particular interest in Deep Tech. Interestingly, LPs who typically invest in specialist funds are overall most interested in Planet Positive, Frontier Tech, Decentralised Finance/Crypto, and Improving Health. These themes all fit under a broad umbrella of future-gazing, mission-oriented tech. Are LPs with an interested in this type of investment more likely to find what they're looking for in specialist funds?

Share of respondents indicating interest in a particular theme by VC manager experience normally invested in

  • Planet Positive
  • Frontier / deep tech
  • Decentralised finance and crypto
  • Improving health systems
  • Future of food
  • Future finance, excluding crypto and decentralised finance
  • Digital life and play
  • Industrial automation
  • Digital work
  • Future of consumption
  • Mobility
  • Empowered Individuals
  • Internet infrastructure
  • Real estate
Notes
LP respondents only. Numbers do not add to 100 as respondents could choose multiple options.

Source

First-time fund managers are raising Planet Positive funds

The list of VCs that raised new funds in 2021 paints an interesting picture of the changing face of VC in Europe. Looking only at the top 10 largest funds raised this year to date, four of them are first-time funds and four of them have a dedicated impact focus, including food, cities and climate. It's clear that a new generation of VCs is emerging in Europe with a strong impact-driven mission and values. There is an ever deeper and more sophisticated pool of VCs with strong reputations and track records, especially emerging from the Seed stage. For example. funds such as LocalGlobe, Firstminute Capital, Stride.VC, Fabric Ventures and Icebreaker.vc all raised new, larger funds in 2021.

Select European VC funds raised in 2021 by fund size and country

Notes
Based on European VC 2021 vintage funds headquartered in Europe.

Source

Fintech, health and B2B software are key thematic focus areas of new funds raised in 2021

Beyond the emergence of new first-time funds with a dedicated focus on purpose, we partnered with Craft to quantify the thematic focus of the more than 250 VCs that raised new funds in 2021. A third of those funds position themselves as sector-agnostic, but for those that disclose specific thematic interests, the most prevalent areas of focus are fintech, health and B2B software. It's interesting that crypto and blockchain was not frequently cited as a specialist thematic focus area by the 2021 vintage of funds.

Investment focus of new funds founded in 2021

Rise of the European crypto funds

Europe has long since been home to OG crypto investors that have stayed the course through every market cycle and ‘crypto winter’. This year many of them returned to LPs to double down on the opportunity, buoyed by strong returns as European crypto winners helped to deliver benchmark-beating returns. Greenfield One announced Europe’s largest dedicated crypto VC fund to date in November 2021 at $160M. Other notable fundraises in 2021 included Fabric Ventures raising a second fund at $130M.

Semantic Ventures (United Kingdom)

Fabric Ventures (United Kingdom)

Raised $130M in 2021

Greenfield One Management (Germany)

Raised $160M in 2021

Libertus Capital (United Kingdom)

Raised $9.7M in 2020

Tioga Capital Partners (Belgium)

Raised $50M in 2020

Bitscale Capital (Switzerland)

Outlier Ventures (United Kingdom)

BitFury Capital

Raised $80M in 2018

FinLab (Germany)

Raised $99.7M in 2020

I’m an American who chose to build my venture fund, January Ventures, in Europe because I believe the ecosystem here is just getting started.

We are seeing more entrepreneurs choosing to stay in Europe to build their companies instead of moving to the US. We are seeing experienced operators from the European headquarters of big tech companies increasingly joining local start-ups and scale-ups. And we are seeing it become more of a social norm to choose a job in tech over other careers. Still, I see gaps and opportunities. We need more experienced operators in venture in Europe. We need more diversity – of thought, of background, of experience. And we need to break down silos, in order to create a more collaborative ecosystem across Europe.

Maren Bannon

January Ventures | General Partner