• Zeroto7 team


When comparing the funds invested in startup businesses over the past five years, Europe has continually played ‘3rd fiddle’ to the US and China. However, overall investment figures have declined in 2019, as the two superpowers simultaneously live through political machinations not seen for decades, whilst in the midst of a trade war with serious global ramifications. All the while, growth in European funds continues unabated. Here we look at the amounts invested, the trends in investment, possible reasons for these trends and what it means for startups trying to raise funds and find a base in the year ahead.

These assessments are primarily drawn from Dealroom data, but we also consulted CB Insights, Crunchbase and Pitchbook for insight where relevant. Whilst anomalies between each source exist, examination of trends tended to be consistent. That said, feel free to get in touch and suggest any additional information.


While 2018 was a record setting year, the total capital invested for 2019 has tapered off. Based on projections, the capital invested by US funds will finish the year around 25% down on last year, with total Chinese investment half that of 2018. Meanwhile, Europe is on track to deliver growth of around 8%.

This downward trend globally can be partially attributed to apprehension around Brexit and the US-China trade war; issues influencing not just the flow of venture capital, but economic outlook and consumer sentiment worldwide.

The graph below from CB Insights demonstrates how these two issues have infiltrated corporate boardrooms, tracking the total number of times each was mentioned on quarterly earnings calls since 2015. Brexit fears begin with a huge spike after the referendum in mid-2016, while concerns over Chinese economic activity grew throughout 2018 and 2019.

These global issues are accompanied by a simultaneous trend away from seed and angel funding by venture firms. The total number of VC deals peaked in 2015 and since then, even as total capital investment continued to increase, the number of angel and seed deals has steadily fallen.

In such uncertain times, many VC’s seem to prefer larger, late-stage deals, viewing these as safer bets than multiple, smaller deals. The proportion of US IPOs with negative earnings reached almost 70% this year (a figure not seen since the dot-com bubble), which backs up the investment trend towards already successful businesses, delaying an PO for a larger, longer-term payoff.


In capital investment terms, Europe has generally bucked the downward global investment trend. While the UK commonly contributes roughly half of all European investment funds and is home to a large and vibrant startup ecosystem, Germany and France are fast catching up on both fronts. France will end 2019 with 31% growth on funds invested, almost on par for the first time with Germany, which has grown ‘only’ 12%.

Brexit uncertainty has hampered the ability of the UK financial services industry to plan ahead, as the other major European economies up their game. The governments of France and Germany are looking to capitalize on their relative stability, attracting foreign investment and encouraging large corporations to move from Britain and elsewhere. This is reflected in the 2019 ‘EY Europe Attractiveness Survey’, where global business executives identified western Europe as a more attractive place for foreign investment than at any time in the last ten years.


Nowhere has the influence of government policy been felt more fully than in France. The French government has made the digital economy a major priority, providing direct funding through their investment vehicle BPI, tweaking taxation laws to stimulate startup investment, increasing funding for local incubators and introducing new visa programs for entrepreneurs and the technically skilled. As Cedric O, Secretary of State for the Digital Economy recently told the Financial Times “we want to make Paris a truly international place, to bring people from India, China, Africa and the US".

These government initiatives have helped deliver a five-fold increase in total French funds invested since 2014, alongside a four-fold increase in the amount invested specifically in French companies. According to dealroom, France is now second only to the UK when it comes to potential unicorns, companies currently valued at $250 million to $1 billion. No surprise then that the EY survey also showed that Paris is now the most attractive European city for foreign investment.


Unlike Germany where funding and corporate HQ’s are dissipated across the country, Paris is at the epicenter of both in France. This also explains why the French capital beats out Berlin as a source of funds, with three times the figure of funding projected to originate from Paris compared to Berlin in 2019.

Berlin, along with Stockholm and Riga, does have a language advantage over Paris, with English being more commonly used in business in both those cities. France also suffers from a notoriously cumbersome administration, chief amongst whose issues is a three-month notice period when leaving a job, resulting in a six-month hiring cycle which seriously hampers fast-growing companies. As Suranga Chandratillake, general partner at venture firm Balderton Capital, told the FT "France is a wonderful place but it is very French"

Nonetheless, there are bountiful opportunities in France, as well as Germany and elsewhere in Europe, when compared with a flailing global economy. Subsequently, there has never been a better time to be a European fund, raise funds for a European startup or be a European-based entrepreneur.

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