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In the last 10 years, European venture has experienced growth year over year at between 16 percent and 55 percent–bar one year (2016) that was down 13 percent. (2014 and 2015 each experienced growth above 50 percent year over year.)  

Fast-forward to 2020: Overall European venture funding is down 17 percent for the first three quarters of 2020 compared with the peak funding year of 2019, according to Crunchbase Data.

Read our Q3 2020 funding reports for the globe here and North America here

However, this third quarter captured the highest funding since Q3 2019, with a particularly strong funding month in September 2020, the second-highest funding month in the last two years. Funding tracks at $10 billion in Q3 2020, up 21 percent quarter over quarter but down 12 percent year over year.��

And as we note in this report, investors are raising ever larger funds, along with more companies raising rounds above $100 million.��

Overall, European venture peaked in 2019, contrasting with the U.S., which peaked in 2018. Funding to European-headquartered startups is around a third of U.S. funding. However, with some leading European startups moving to the U.S., but retaining their initial offices in Europe, the funding impact is larger than the following investment charts indicate.

Large fundings

In Q3 2020, there were 20 European companies that raised rounds above $100 million, the highest count of companies in that range within a single quarter over the last two years. These companies are headquartered across Europe from seven different countries including Sweden, Germany, United Kingdom, France, Finland, Netherlands and Turkey, which are listed below in order of the most funding raised.��

Notable companies include payments company from Sweden, cloud kitchen service , and security analysis platform , both from the U.K., , a peer-to-peer loan marketplace, and vertical farming company , both headquartered in Germany.��

Funding rounds over $100 million represent 45 percent of venture capital this quarter, higher than the second quarter at 27 percent and Q3 2019 at 39 percent.��

Five new European companies joined the unicorn leaderboard this quarter including ecommerce marketplace enabler (France), fitness apparel-maker (U.K.), customer-engagement platform (U.K.), payments platform (Netherlands), and nutrition company (Sweden), bringing the total to 71 private .��

Leading countries

The leading countries for investments are the United Kingdom, Germany, France and Sweden. For France and Sweden, funding in 2020 for the first three quarters of the year is slightly above 2019 funding levels. For the first three quarters of 2020, the U.K. and Germany are down 21 percent and 19 percent, respectively, compared with 2019.

Funding by stage

Seed-stage funding is down both quarter over quarter and year over year, but seed funding also shows the highest data lags with the majority of smaller seed fundings added after the end of a quarter.��

Early-stage venture was at $4.1 billion in Q3, up 33 percent quarter over quarter and 1 percent year over year. We attribute some of this increase quarter over quarter in part to large fundings above $100 million at the Series A and B stages.��

Late stage–which includes Series C and later rounds as well as private equity–in venture-backed companies comes in at $5.2 billion, up quarter over quarter by 19 percent, but down year over year by the same percentage.

Active investors

Despite the pandemic, European venture firms are raising ever-larger funds in 2020. Earlier this year, from London raised its fifth and largest fund of $820 million. This past quarter, London-based raised its fourth and largest fund to date at to back enterprise software startups. , headquartered in Berlin, raised its fifth seed fund of $100 million to back B2B SaaS and marketplace companies. And , the founder of , has committed to investing startups over the next decade.��

Leading investors this quarter include (France), (U.K.) and (Austria). (U.K.), (Germany), and (Germany) round out the top six firms by funding count.��

Liquidity

Acquisitions with disclosed amounts totalled $3.5 billion for European startups in Q3 2020. The largest deal was the acquisition of , a Madrid-based online real estate platform for renting, buying and selling homes and apartments. The company is active in Spain, Italy and Portugal, and is set to be acquired by , a global investment organization. EQT  acquired in Q3 2020, a leading player in online real estate advertising in Italy.��

Strong performers that went public this quarter include and . CureVac is up over 200 percent from its IPO price and currently valued at $9.6 billion, and COMPASS Pathways is up over 100 percent and valued at $1.3 billion as of mid-October.��

The big picture

The two leading ecosystems in Europe, namely the U.K. and Germany, secured less funding in 2020 compared with 2019. Despite Brexit and the accompanying loss of European funds, the U.K. will continue to be the leading market in Europe due to the cluster of leading venture firms, ties to the U.S. venture markets, English as a global language, and London, a cosmopolitan city.��

Since the 2016 Brexit vote, the U.K. has fluctuated between 34 percent and 41 percent of European venture capital on an annual basis. In contrast, Germany, the second-biggest funding market in Europe, garners 12 percent to 17 percent of European funding capital.��

Four out of the next five leading countries–France, Sweden, Netherlands and Finland–have all experienced funding growth in 2020.

“Despite the global health and economic crisis, European tech has proved its resilience and solid foundations this year,” said partner and head of insights at . “Investment levels reflect the quality of founders and companies emerging from Europe, such as some of this year’s breakout companies like , , and , companies that have capitalized on the shift toward more remote work and growth in e-commerce.

“There remains huge upside potential as tech entrepreneurship and startup communities scale to all corners of Europe, and the flywheel of systematic recycling of talent and capital propels more mature hubs through the scaling of highly liquid entrepreneurial talent and funding marketplaces,” he added.

After a slower start to the year, European funding has picked up in the third quarter, the strongest funding quarter since Q3 2019 with a higher count of $100 million plus rounds. With the strong performance of recent public offerings of tech stock in the U.S., we are asking which will go public next.��

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data as of Oct. 7th 2020.��

Data lags are most pronounced at the earliest stages of venture activity with seed funding amounts increasing significantly after the end of a quarter.��

The most recent quarter will increase over time relative to previous quarters. For funding counts, we notice a strong data lag, especially at the seed and early stages, by  as much as 26 percent to 41 percent a year out.��

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding, and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.��

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series,  corporate venture, and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration:

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Overall, venture investors put $35.7 billion into seed- through growth-stage funding rounds for North American startups in the third quarter of 2020, according to preliminary data from Crunchbase. That marks a 9 percent rise from Q2 funding totals and a 2 percent gain from year-ago levels.

In short: Predictions the COVID-19 pandemic would lead to a sharp pullback in North American startup investment have not come to pass.

Among startups raising funding in recent weeks, a common refrain is that the rise in remote work, education and commerce driven by the pandemic has accelerated broad societal shifts already underway. As a result, companies focused on spaces such as distance learning, remote collaboration and telemedicine are seeing a sharp rise in funding, even as other sectors may be contracting.

Supergiant, late-stage rounds drove the rise in Q3, including huge financings for companies like electric pickup truck-maker , health insurance platform , and online lender .

Seed- and early-stage dealmaking, meanwhile, was down in Q3, according to end-of-quarter data. However, those totals are expected to rise as late-reported rounds enter the database.

While money kept flowing into startups, investors also saw some big returns from acquisitions and public offerings. On the M&A front, we saw a spate of deals at prices over $1 billion, topped by ’s $8 billion acquisition of its former spinoff , a cancer-screening unicorn. It was also a big quarter for public-market debuts, led by headline offerings from , and .

We dug into the numbers in more detail, focusing on round counts and investment totals at each stage, as well as action on the exit front.

The big picture

Let’s start by looking at overall funding across stages, laid out in the chart below.

Late-stage

The bulk of venture capital funding went to later-stage rounds (Series C and beyond), so we’ll focus on this area first.

In Q3 2020, investors put $21.1 billion to work across 228 deals; the highest investment total and the second-lowest round count total of the past five quarters.

What’s going on here? In two words: Supergiant rounds. In Q3 2020, North American companies closed on 56 so-called supergiant rounds of $100 million and up (see ), per Crunchbase data. That’s up from 42 in the prior quarter and 45 in the year-ago quarter.

There was no single industry that dominated the ranks of big check recipients. The largest rounds included the aforementioned Bright Health and Affirm (now en route to IPO), along with online bank , stock trading platform , and connected fitness startup .

The robust IPO market probably contributed to the late-stage spending spree. Enormous market caps attached to Snowflake and other IPO debuts helped assuage private-investor fears about public markets supporting high valuations for money-losing unicorns.

Technology growth

Technology growth-stage investment totals and round counts were all also up in Q3, as illustrated in the following chart.

Historically, technology’s growth stage is our most volatile category. Since there are fewer deals at this stage—and they skew on the large side—one or two really big ones can heavily affect quarterly totals.

That’s what happened in Q3: A single $2.5 billion round for Rivian led by , accounted for more than half the quarterly total.

Early-stage

Early-stage investment (Series A and B), meanwhile, was a bit more muted in Q3 2020, according to preliminary reported data.

Based on that reported data, investors put $9.2 million into 526 known early-stage funding rounds in Q3. That’s down from the $11.9 billion Q2 total and the $10.8 billion total from Q3 2019. The chart below breaks out the last five quarters.

We’re not going to make too much about the top-line numbers. A nontrivial percentage of early-stage rounds get reported after the quarter ends, so the total should rise as more late-reported rounds enter the database.

Instead, we’ll look at where the money went in Q3. Life science and health care accounted for more than 40 percent of the funding total, and enterprise software and ed tech saw elevated levels of investment, per preliminary data.

As usual, a few really large rounds lifted the totals. Those rounds include: a $257 million Series A round for , a cancer diagnostics startup; a $240 million Series B for , which focuses on high-performance silicon design; and $145 million in Series B funding for , an online platform for HR.

Seed stage

North American seed-stage dealmaking also held up in Q3, with $1.4 billion invested across 1,048 known rounds, per preliminary Crunchbase data. We look at round counts and dollar totals across the past five quarters in the chart below.

Since a sizable portion of seed-stage deals are reported after the quarter ends, we’ll avoid making too much about the top-line number. Top sectors for seed-stage investment in Q3 included fintech and financial services, health care, life sciences and e-commerce. Finance startups in particular have seen a sharp year-over-year increase in seed funding, aided no doubt by the industry’s impressive track record for creating unicorns.

The median seed round was $760,000 in Q3. However, there were a few substantially larger deals, including $20 million for biotherapeutics developer , $16 million for ed tech startup , and $14 million for mail-tracking provider .

Exits

The third quarter stood out as unusually robust for exits. Public offerings in particular were on a tear, with highly valued unicorns opting for either a traditional IPO or a direct listing.

IPOs and direct listings

The IPO window was wide open, and hot companies that made it to market were rewarded with market caps in the billions or tens of billions of dollars.

The leader of the pack was data warehousing company Snowflake, with a record-setting software offering that raised $3.4 billion, and a recent market cap around $70 billion. Overall, more than 10 North American venture-backed companies that went public in Q3 closed out the quarter with market caps in the billions of dollars.

We put together a full list of venture-backed companies that went public in Q3 . In the chart below, we look at the biggest debuts.

M&A

A bullish IPO climate doesn’t always coincide with a hot M&A market. When unicorn valuations get bid sky-high, acquirers can be reticent to pay those prices.

That didn’t happen in Q3. While public investors pushed up shares of market newcomers, the acquiring companies wrote some pretty hefty checks for private companies.

Crunchbase data shows several acquisitions of venture-backed companies for $1 billion or more, including two valued at over $7 billion: Grail and . We lay out the largest announced deals in the chart below.

The big picture

To sum up where we are in Q3 2020, here goes:

Many close observers of the North American startup funding ecosystem have been waiting a long time for the big slowdown. It hasn’t happened. It’s unclear when or if it will happen. For those who’ve been talking about an eventual slowdown (myself included), it’s predicated on a few notions:

• Liquidity and fundraising for startup investors would dry up.
• Private investors would balk at continued sky-high valuations.
• Public investors and acquirers would refuse to uphold lofty private valuations.

None of those things have happened. And rather than merely mirror sky-high private valuations, public markets have bid up hot companies like Snowflake higher than imagined.

One might envision the global spread of a terrible new disease could depress things some, but we’re nine months into a pandemic and that hasn’t happened.

At this point, the unicorn bull market is looking more like a raging bull market. Yes, it can be stopped, but not easily.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding, and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series,  corporate venture, and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration:

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When lockdowns were rapidly implemented worldwide in March, the prevailing sentiment was that an economic downturn was coming. Naturally, the thinking went, this would impact venture funding and the IPO markets.

That has happened, but not as negatively or in the way many expected.

Instead, over the past two quarters, we have witnessed an accelerated shift to cloud-based services that has been both dramatic and likely persistent, as many of these new behaviors seem poised to endure post pandemic.

And the IPO market is booming.

A look at the numbers

Following a strong second quarter in global funding, the third quarter of 2020 has held up with $76.4 billion in venture funding worldwide—up 1 percent quarter over quarter and 9 percent year over year.

That resilience in venture investment comes amid a sudden change in how we work, learn, shop, dine, travel, consume entertainment and exercise. Neighborhoods are changing with the closure of restaurants and stores while hotels are being repurposed for frontline pandemic workers. Around the world, are not being educated in a classroom, according to the World Economic Forum. And according to a study from Stanford University, is working from home. With a high 33 percent of workers not working at all, and the 26 percent of essential workers who are employed on-premises, the U.S. has become a dominant work-from-home economy. Many tech companies have extended their work-from-home periods to July 2021 and some indefinitely. The seismic shift to remote work and school has prompted a boom in cloud-based services and funding for that technology.

“In the last couple years there’s been a trillion dollars of on-premise software that’s transferring to the cloud,” from venture firm said in an interview with Crunchbase News. “And that’s just accelerating.”

reported a jump in daily meeting participants from 10 million in December 2019 to representing a 2,900 percent growth over this four-month time frame.

Meanwhile , which connects users’ bank accounts with apps, experienced a surge in usage constituting a 44 percent increase across its customer base March through May when compared to the same period last year.

A survey conducted by Plaid found that 80 percent of Americans say they have no need for a physical bank branch to manage their finances. New stores created on the platform, which enables small and medium-sized businesses to sell online, grew 71 percent in Q2 2020 compared with Q1 2020.

Crunchbase data shows increased investment between Q1 and Q3 2020 versus the same period in 2019 in health care, apps, payments, education and gaming. Quarter over quarter—when excluding sectors that only showed growth due to a dip in Q2—there has been increased funding to the commerce and shopping, manufacturing, sports, gaming, agriculture and farming, and clothing and apparel sectors.

With this strong funding quarter in mind, here is a quick summary of global funding by stage.

Early-stage funding down

At $2.6 billion, seed funding in the third quarter was down 32 percent year over year and down 11 percent quarter over quarter. It’s worth keeping in mind that seed is the stage with the most extensive reporting delays, as smaller seed fundings are often not reported via the news cycle, but added by founders over time.

Early-stage funding, meanwhile, was $19.3 billion in the third quarter, down 18 percent year over year and down 14 percent quarter over quarter. This difference will lessen as fundings are added after quarter-end, but will most likely not reach the early-stage funding levels of 2019.

Late-stage funding is up

Late-stage funding has increased in the third quarter with 452 rounds raising $48.1 billion, up 24 percent year over year and 26 percent quarter over quarter. A larger share of funding is going to later-stage rounds in the third quarter at 71 percent.

Rounds above $100 million account for 61 percent of funding and come in at 169 rounds for this quarter compared with 148 rounds in Q2 2020.

For this quarter, private equity rounds in venture-backed companies tracked at $6.3 billion. This amount is up 76 percent year over year but down 48 percent quarter over quarter.

In summary, late-stage funding  has grown in recent months as investors look toward a strong exit market as the IPO markets opened up in June.

Active investors

Active investors in venture capital this quarter show leading venture funds , , and alongside leading corporate venture firms and .

Alternative investors focused on late-stage include , , , and . These investors have been incredibly active this quarter, an indicator of late-stage funding reaching a new height when compared to the last six quarters.

Firms with a majority of investments in Series C+ rounds include all the alternative investors listed above, as well as , a dedicated health care investor, and .

Acquisitions increase

Nine venture-backed companies were acquired for more than $1 billion in the third quarter—the highest count per quarter since the beginning of 2019. As of the end of September we recorded 298 global acquisitions at $40.4 billion in the second quarter. (Editor’s note: The majority of acquisitions do not include a price. We also exclude companies that previously went public.)

The largest M&A this quarter was Menlo Park, California-based , a blood cancer screening company set to be acquired by for $8 billion pending regulations. Illumina already owned 14.6 percent of Grail since it originally founded the company then spun it off. And, according to Grail’s S-1, Chicago-based owns 9.5 percent of the company’s stock.

Rockville, Maryland-based gaming platform came in at a close second after its planned acquisition by for $7.5 billion. The third-largest was the acquisition of Bay Area-based , which provides real-time data infrastructure, by U.K.-based for $5 billion. and are investors in the company.

was the most active acquirer in Q3 2020, with three acquisitions including Canada-based contactless payment startup , San Francisco-based podcast streaming service , and , a Santa Monica-headquartered company that develops VR, AR and MR for theme parks.

IPO market opens up

This year “is now on track to surpass last year by deal count and proceeds, with the biggest IPO market by capital raised since 2014,” according to a by , a research firm focused on the IPO market.

Six out of seven venture-backed companies in 2020 with an IPO market valuation above $10 billion went public this quarter. This list includes , the most valuable software company IPO of all time, valued at $33.2 billion at the time of its public-market debut. Its last valuation in a private funding round was at $12.4 billion. As of Oct. 7, Snowflake is valued at just over $68 billion. Other companies valued above $10 billion on going public include Beijing-based , Denver-based , Beijing-based , San Francisco-based and Santa Monica-based .

The digital consumer

As technological advances provide services for the digital consumer, it comes as no surprise that technology stocks and private tech companies are experiencing a moment despite an economic slowdown.

Looking forward, , , , , and have all recently filed to go public, while and are planning debuts via SPACs. And with a record 631 companies listed on our , with 33 new unicorns joining in this third quarter, we are in for a busy final quarter of 2020.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported as of October 7th 2020.

Data lags are most pronounced at the earliest stages of venture activity with seed funding amounts increasing significantly after the end of a quarter.

The most recent quarter will increase over time relative to previous quarters. For funding counts, we notice a strong data lag, especially at the seed and early stages, by  as much as 26 percent to 41 percent a year out.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding, and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series,  corporate venture, and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration: