Despite London being home to 43% of all European 'rocketship unicorns' achieving billion-dollar valuations rapidly, the broader early-stage funding pipeline across Europe is reportedly collapsing. This trend is marked by a significant reduction in early-stage deals.
Since 2021, early-stage deals at pre-seed, seed, and Series A have fallen by 38%, 41%, and 45% respectively across Europe. The most pronounced issue is at Series A, where the conversion rate for startups that raised a Seed round has plummeted to 9.3% from 23.3% between 2008 and 2019.
This situation is attributed to a severe contraction in active investors, with the number of institutional investors deploying early-stage capital dropping by over 40% since 2022. International Tier 1 VCs are reportedly focusing on a few outlier deals, increasing check sizes for these while the wider market is overlooked.
London is particularly affected, with UK startups converting from Seed to Series A at one of Europe's lowest rates. An estimated $8 billion would be needed to restore the early-stage pipeline across Europe to its historical conversion rates, which could yield an additional 11 unicorns annually.