Number of new venture capital firms drops by two thirds in 2021

Volume of new VCs being founded in Britain drops by two thirds in 2021, reflecting a wider European slowdown in new venture capital firms opening their doors

The number of new venture capital investors founded in the UK shrank by two thirds in 2021, reflecting a wider European slowdown.

Sixty-one new European VCs were founded last year — only half the number of new investors compared with 2020, according to research.

Ten of these new VCs were founded in the UK.

There were 817 venture capital investors across Europe as of end-2021.

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The UK however remains Europe’s top country when it comes to both the number of local investors (191) and assets under management (€468bn), according to the 2022 European Capital Report.

Out of the 191 VC investors who have their headquarters in the UK, 67 per cent have an early-stage investment focus, at least among other stages.

This trend appears to be unbroken – nine out of the ten new investors founded in 2021 invest exclusively in early-stage startups.

“European scale-ups in later stages are largely dependent on money from the UK where by far most of the European growth capital is concentrated. However, the bigger the funding round, the more likely we see a US investor in the lead. There is definitely potential for more growth capital across Europe”, said Simona Huebl, CEO of report co-author i5growth.

And London remains Europe’s venture capital epicenter. The British capital alone counts 316 offices of investors from all over the world.

British investors are invested in 88 out of 130 Europe’s unicorns and have the most successful portfolio compared to the rest of Europe.

Of a total of 130 European startups valued at more than one billion dollars, the so-called unicorns, 68 per cent have at least one British venture capitalist on board.

For companies that investors believe have the potential to reach this billion-dollar valuation threshold in the next 24 months, the so-called “soonicorns”, this figure is as high as 60 per cent.

British investors particularly focused on early-stage investments in healthtec and life science last year.

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Despite Brexit, the UK continues to lead the ranking of countries with the most VC offices in Europe (351) – both local investors and VCs which have their headquarters elsewhere – followed by Germany in second place (199), France in third place (128), and the Netherlands in 4th place (70).

In the ranking of the largest venture capital investors from the UK in 2022 based on respective assets under management, Balderton Capital leads ahead of Atomico, BGF, Octopus Investments, and Octopus Ventures.

If one ranks all investors in the UK according to the number of investments made in 2021, Seedcamp leads with 116 investments, followed by BGF (113), Entrepreneur First (111), HG Capital (108), and SFC Capital (103).

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