Early Wins, Late Losses: Europe’s Startup Valuation Divide Deepens

European startups in the early stages are finding some relief during the current funding shortage. As per Pitchbook’s Q1 2024 European VC Valuations report, the median funding amount for early-stage European startups rose to €2M ($2.17M), driven in part by notable deals such as French EV network startup Electra’s €304M ($330M) Series B funding round.

The percentage of up rounds increased to 76.3%, and this positive direction is anticipated to persist due to declining interest rates. Nonetheless, the percentage of down rounds grew to 21.7%, demonstrating the ongoing challenges encountered by mature startups in raising funds because of limited opportunities for successful exits.

As early-stage startups are feeling relieved, later-stage ones are facing a new set of challenges. The median pre-money valuations for late-stage European startups decreased by 5.4% to €10.6M ($11.5M) in the first quarter. Due to the closed IPO listing window, the majority of exits are now occurring via acquisitions, and the average valuation of acquired startups dropped from €29M ($31.45M) in 2023 to €22.7M ($24.6M) in Q1 2024.

As the funding environment changes, young companies in Europe are taking advantage of bigger investment deals, while established companies are facing challenges with decreasing valuations and limited exit opportunities.