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In 2023, Europe saw the highest percentage of down rounds since 2014, which were the biggest one?

Picture credits: postmodernstudio/DepositPhotos

Currently, the European market is witnessing a major investment crunch. As per PitchBook’s latest report released this week, the valuation of early-stage businesses in Europe has dropped for the first time in a decade. It went from €5.7 million in 2022 to €5.3 million this year. Also, the pre-money valuations of early-stage businesses have plunged by 18.4% from Q2 to Q3.

A decadal dip during the funding crunch

On the contrary, the late-stage companies are going through an upward trajectory in median deal size,  with a record of €3.5 million. This is a 9.4% surge from the previous year. To mention a few, Verkor’s €850 million Series C round and Teylor’s €275 million round set a new benchmark in the median deal size. 

Talking about venture growth, European companies suffered severe valuation drops with the median pre-money valuation plunging by a whopping 26.1% to €22.9 million. Amidst these consequences, Europe saw the highest percentage of down rounds since 2014. In the first three quarters of this year, 21.3% of investments were down rounds, featured by a trim in the valuation. Taking about 2022, down rounds accounted only for 14.8%. This trend shows that there is a surge in the scrutiny of valuations. 

The hardest hit so far?

Revolut was the fintech company with the highest market valuation in Europe. The London-based neobank had a market valuation of $33 billion, but the value dropped to around $19.8 billion, when its prominent investor, Molten Ventures,  marked down the value of its stake in the London-based fintech by 40%.

At the same time, AI remained a prevalent theme, with notable funding for companies like Synthesia and financial crime company Quantexa, the overall value of all unicorns in the region has decreased from €453.8bn at the end of 2022 to €447.4bn in the first three quarters of 2023, according to PitchBook data. That said, here is a list of some of the biggest down rounds in Europe, recently.

After $110M raise, valuation down by more than 50%

Well, crypto had a rough 2023 and so did UK-based crypto exchange and wallet provider They recently did close a $110 million in Series E financing but at a down valuation of less than $7 billion following a $14 billion valuation in March of 2022.

Founded by Benjamin Reeves, Nicolas Cary, and Peter Smith in 2011, is a platform that offers ways to buy, hold, and use cryptocurrency. Prior to a downturn in the cryptocurrency market, the company and similar entities found themselves on unstable footing. In July of the preceding year, declared a layoff of 150 individuals, constituting a quarter of its employees.

These staff reductions came in the aftermath of the company’s $270 million loss to Three Arrows Capital, a crypto hedge fund with an estimated $10 billion in assets. Three Arrows Capital had engaged in a series of high-risk ventures in decentralised finance projects, including the Terra/LUNA algorithmic stablecoin.

Subsequently, the company implemented another round of layoffs, reducing an additional 28% of its workforce earlier this year, aligning with a broader trend among crypto firms downsizing their staff.

Stripe value came down to $50B from $95B

In the first quarter of this year, Irish payment processing platform Stripe secured over $6.5 billion in a Series I funding round, at a valuation of $50 billion. This down round took its valuation to a steep plunge from its mark of $95 billion back in 2021. Prior to this down round, the company had internally reduced its valuation to $63 billion in January.

The round was funded by existing Stripe shareholders Andreessen Horowitz, Baillie Gifford, Founders Fund, General Catalyst, MSD Partners, and Thrive Capital. It also saw participation from new investors GIC, Goldman Sachs Asset and Wealth Management, and Temasek.

Founded by brothers Patrick Collison and John Collison in 2010, Stripe also announced a layoff of 14% of its workforce in November last year. The company aims to go public after turning profitable and this has pushed its IPO slated for this year. 

Gousto’s down round of £50M

The British meal-kit delivery unicorn Gousto also witnessed a downround earlier this year. The ‘Netflix of food’ closed £50 million at a “significant” low valuation in April. Last year, its valuation was $1.7 billion.

Founded in 2012 by Timo Boldt and James Carter, both former investment bankers, Gousto specialises in selling subscription-based recipe boxes. The company positions itself as a provider of affordable, nutritious meals. Noteworthy investors include the SoftBank Vision Fund 2, the largest supporter of technology companies globally, Unilever’s ventures arm, Fidelity International, Railpen (the railways pension scheme), and Grosvenor Food & AgTech, a component of the expansive business portfolio owned by the Duke of Westminster.

Recently it was reported that it is poised to achieve profitability this year and also made some significant cutbacks, reducing its workforce by 29% from 1,750 employees. This downsising was a result of the company scaling back its ambitious hiring plans, which were impacted by the challenges posed by the pandemic.

Rival to Bloomon from Spain: Colvin lost its half-unicorn status

At the same time, Barcelona-based Bloomon rival and long-standing candidate to unicorn —Colvin was almost half a unicorn when it announced a down round earlier this year for €6 million in an internal round provided by its current investors and its founders, Sergi Bastardas and Andrés Cester, and a dozen more shareholders led by Eurazeo. While it was valued at €45 million, the down round has resulted in a significant valuation drop by nearly 40% to 50%.  

Technology firms that achieved remarkable valuations amid the COVID-19 pandemic, benefiting from low-interest rates and abundant liquidity, are now undergoing a comprehensive evaluation. The surge in inflation and a decline in consumer confidence have prompted investors to adopt a more cautious approach when deploying their capital. An illustration of this shift is seen in Klarna, the Swedish payment company, which had to drastically reduce its valuation from $47 billion to less than $7 billion in a private funding round in July of last year. The impact is not limited to private enterprises, as publicly traded fintech companies, exemplified by Nasdaq-listed Affirm, have also experienced substantial declines, with Affirm plummeting over 85% from its debut in January 2021.

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