The first half of the year was remarkable for European startups, with substantial investments and new trends highlighting the continent’s lively innovation scene. Despite global economic uncertainties, Europe, including the UK, has shown resilience and growth in various sectors, driven by strong funding and the emergence of new unicorns.
Record-Breaking Investment and Early-Stage Deals
In H1, European startups attracted a total investment of €47.3 billion, a figure that includes €18.7 billion in debt funding. This substantial influx of capital underscores the robust investor confidence in the region’s entrepreneurial potential. Notably, pre-seed, seed, and Series A deals accounted for a significant portion of the deal count, making up 82.8% with 2,460 transactions. However, these early-stage deals represented only 19.7% of the total funding, amounting to €9.3 billion. This disparity indicates that while there is a large number of early-stage companies, the major share of capital is directed towards later-stage ventures.
In terms of high-growth businesses specifically, in the UK, equity investment totalled £6.53b as of May 2024. This amount is similar to the funding levels seen before the record highs of 2021 and 2022, so in the view of Stakeholderz this represents the promise of a return to a relatively positive outlook for startups and scale-ups, after a notably muted 2023.
The Rise of Unicorns and National Leaders
A key highlight of H1 was the emergence of 8 new unicorns (startups valued at over $1 billion). This marks an impressive growth compared to the previous year, reflecting a thriving market environment and the ability of European companies to scale rapidly. Of the 8 new unicorn companies, 3 of them – namely Quantinuum, Eleven Labs, and Wavye – are based in the UK.
Among the leading nations, the UK emerged as the top destination for startup investment, securing €13.3 billion. Sweden followed closely with €12 billion, boosted by a particularly strong performance in May. France, despite being a traditional powerhouse, came in third with €6 billion in funding, indicating a more measured growth pace.
In the UK, London continues to lead as the main investment hub, with companies in the capital making up over half (50.4%) of all deals between January and May 2024. Following London, the South East and the East of England were the next top regions for investment, capturing 10.3% and 7.06% of the total deals, respectively.
Sectoral Focus: Energy, Biotech, and Fintech
Certain sectors particularly stood out in the first half of the year. Energy storage, advanced materials, and electric vehicles (EVs) got a lot of attention, showing the global trend towards sustainable technologies. These areas attracted significant investment and showed great promise for innovation. However, if we look at the sheer number of deals, biotech, medtech, and data & analytics took the lead. These sectors are crucial for tackling major global issues like healthcare and information management, which is why they’ve caught the eye of many investors, particularly in the sustainability space.
Climate tech was a big draw, pulling in €21.3 billion, mostly thanks to some significant debt rounds. This highlights the urgent need for solutions to combat climate change. Interestingly, in Q2, fintech saw more investment than climate tech, signalling a renewed interest in financial technologies and digital transformation. It will be interesting to see if this comparative focus continues, given the fact that effective climate-related solutions remain of critical importance – although a single quarter on its own doesn’t necessarily tell us too much.
M&A Activity
In the first half of the year, M&A activity was buzzing, showing a trend towards consolidation and strategic partnerships across various industries. There was a mix of big deals and smaller, focused acquisitions, as companies aimed to expand their market presence, acquire new technologies, and strengthen their competitive positions.
Several factors drove this surge in M&A activity, including the need for businesses to adapt to rapidly changing market conditions, the pursuit of synergies, and the desire to explore new growth opportunities. We saw notable activity in sectors like healthcare and renewable energy, as companies aimed to meet evolving consumer demands and take advantage of technological advancements.
Healthtech, in particular, stood out, with six deals surpassing €100 million. Among these were two major acquisitions, each surpassing €1 billion: Eyebio was acquired by Merck for €3bn, and Novo Nordisk acquired Cardior Pharmaceuticals for €1bn. This flurry of large transactions highlights the strong interest from investors and the significant growth potential within the healthtech sector, driven by a rising demand for innovative healthcare solutions and technologies.
Conclusion
The first half of 2024 has really shown how strong and varied the European startup scene is, with lots of investment pouring into different industries and regions. Europe continues to be a great place for innovation and new business ventures, and as an advisory firm based in the UK, a key driver of European startup and scale-up activity, Stakeholderz are excited to play our part in supporting fundraising and M&A deals within the sustainability ecosystem. As the second half of the year proceeds, it’ll be interesting to see how these trends play out and what new developments emerge in this constantly evolving landscape.
Statistics Sources: Sifted & Beauhurst
