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VC investment in Europe ‘humming along’ – KPMG report

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Venture capital (VC) investors on the continent played “a waiting game” in the second quarter of the year, according to the latest instalment of KPMG’s Venture Pulse report.

Noting how investors were embracing AI, the report’s authors wrote: “AI and deep-learning technologies were a hot area of investment in Europe during Q2 23, with UK-based Quantexa raising $129m (€117m) during the quarter to earn ‘unicorn’ status –  one of only a handful of startups in the region to do so this quarter.

“In Q2 23, the European Union also passed the AI Act, a detailed regulation governing the use of AI in the region and requiring generative AI systems in particular to be reviewed prior to commercial launch. The regulation also bans real-time biometric ID systems. During the quarter, the UK also pitched its desire to become the home of AI safety regulations.”

The report also highlighted how, “with no end in sight to the Russia-Ukraine conflict”, alternative energy and cleantech continued to attract attention from VC investors in Europe, “although ticket sizes were relatively modest during Q2 23”.

It continued: “Interest in the space was incredibly diverse, both geographically and at a product and solutions level, with Germany’s 1Komma5 raising $232.1m, leading the way.” It was followed by German energy storage company Jolt Energy, raising $165.1m, London-based atomic technology company Core Power raising $100m, Austria-based cleantech Neoom raising $44.9m, Israel-based thermal sensing for autonomous electric vehicles firm Adasky raising $30m, and Ireland-based renewables-focused energy transmission company SuperNode raising $17.35m.

More broadly, however, KPMG said investment remains cool in Europe, with $13.5bn invested overall across 1861 deals in the period under review. It singled out the Nordic region as remaining soft, especially in comparison with VC investment into Israel.

‘Reluctant’ investors

Looking ahead, the report suggested VC investors within Europe were likely to remain reluctant due to market conditions and concerns about whether they will be able to raise new funds given less risk-averse limited partnerships now have more investment options available to them.

KPMG added: “Exit activity is also expected to remain limited, with start-ups and their investors playing a waiting game in the hope that conditions improve and the market stabilises. The entire gamut of alternative energy and cleantech is expected to remain a robust area of investment in Europe, in addition to AI, and health and biotech. Over the next few quarters, the fintech space could begin to see some consolidation in Europe as companies look to achieve the scale needed for their business models to become profitable.”

Pete Carvill

Pete Carvill is a reporter, writer, and editor based in Berlin who has been writing for the B2B and mainstream media since 2007. He is a contributing writer for Expert Investor and, in addition, has...

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