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European Venture Capital Activity Robust In 2020 Despite Pandemic

The VC Factor - Pandemic Edition, a new report from trade association Invest Europe and the European Investment Fund (EIF) - Europe's largest venture capital LP - suggests that the European venture capital industry remained robust in the immediate aftermath of the Covid-19 pandemic. The report says that whilst the number of investments by VCs reduced by 13.6% between March 11, 2020 – the date on which the World Health Organization declared the COVID-19 outbreak a pandemic – and the end of the second quarter, the decline was offset by a 19.3% increase in the average amounts invested into companies, as VC firms continued to back the start-ups driving European innovation and laying the foundation for a better tomorrow.

The European healthcare sector stood out during the period with a 77% increase in investment volumes, reflecting VCs enhanced focus on biotech companies developing potential vaccines and treatments for COVID-19, as well as start-ups committed to improving healthcare for European citizens more widely.

The findings of the report echo Invest Europe’s flagship report ‘Investing in Europe: Private Equity activity 2020’, which showed that venture capital investment in Europe grew for the eighth consecutive year to €12bn in 2020,

“The resilience of the European Venture Capital industry in the wake of COVID-19 has been remarkable. For decades, the EIF has been striving to contribute to the development of a sustainable VC ecosystem and the emergence of new European VC hubs. The results of this research are therefore rewarding: they show that European VCs were able to adapt quickly to the situation and record a strong year of activity despite the pandemic, whilst sustaining investments into start-ups delivering cutting edge solutions, including in health and technology," said Alain Godard, Chief Executive of the EIF.

Eric de Montgolfier, CEO of Invest Europe, added: “European venture capital did not escape the effects of COVID-19 but responded with characteristic strength. Across the continent, VCs continued to invest in disruptive technologies as well as life-changing biotech and healthcare innovations. Europe is packed with entrepreneurial talent and venture capital is crucial to a strong recovery from the effects of COVID-19, as well as essential to a brighter long-term future for all Europe’s citizens.”

The report also shines a new light on where Europe’s venture capital managers are based and where they invest, illustrating that VC firms tend to cluster together much more than their investee companies. The top 12 hubs in Europe represent 61% of the investment capital deployed but only 40% of investment received. London, Europe’s largest venture hub, accounts for 23% of money invested and 12% of capital received. It is followed by Paris, which is the source of 15% of capital invested while receiving 7% of venture capital deployed. As a proportion of GDP, however, Berlin is the largest VC hub in Europe, followed by East Anglia in the UK where investment is focused on innovation emerging from leading university Cambridge.

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