2023 in Review: How Pre-seed and Early-Stage European Startups Outperformed in a Tough Year

In 2023, pre-seed and early-stage European startups showcased resilience and growth, defying the broader fundraising downturn. According to a recent Pitchbook report highlighted by TechEU, these startups not only survived but thrived, with pre-money valuations for pre-seed and early-stage ventures climbing by 4% and 2.5%, respectively. This growth comes in contrast to the overall cautious atmosphere pervading the investment landscape.

The data reveals an intriguing trend across the startup lifecycle. While the median deal value for pre-seed, seed, early-stage, and late-stage startups recorded increases of 8.4%, 5.3%, 2.8%, and 11.7% respectively, seed-stage startups experienced a 9.2% year-on-year decline in valuations. This decline underscores the varied impact of market conditions on startups at different stages of development. Particularly noteworthy is the stark contrast faced by startups in venture growth stages, where both deal value and valuations witnessed declines of 4.7% and 26.6%, respectively.

The report also sheds light on the exit environment, noting a significant 28.7% drop in median exit valuations, which settled at €23M ($24.9M) in 2023. IPO debutants were particularly hard hit, with median valuations plummeting by 60.3%, a stark contrast to the 25.2% decline observed for acquisitions. This downturn in exit opportunities reflects broader market challenges and investor caution.

Despite the hurdles of the past year, the outlook for 2024 is cautiously optimistic. Pitchbook’s analysis suggests a year marked by rates, recovery, and rationalization. The expectation is that startups in fragmented sectors may seek mergers as a strategic response to the current environment, potentially leading to a more rational valuation landscape.