Early-stage rounds continue to represent the majority of investments in the European startup market, and on Tuesday one of the region’s largest firms announced a new fund to reinforce that trend. Accel has raised $650 million to back startups from seed to Series A across the UK, the continent and Israel. The fund is the eighth of its kind for Accel since it put down roots in London in 2000.
Accel has invested in over 200 startups in the region to date, making it one of the most prolific venture capital firms in this market.
One of the recurring laments heard in Europe is that even as the region produces exceptional talent and ideas, companies on the continent face challenges in scaling. However, there have been a number of exceptions over the years that test that claim, and part of Accel’s gravity as an investor comes from the fact that it has backed several of them. They include some of Europe’s most successful startups, such as Supercell and Spotify (also, incidentally, a duo of Nordic startups, born respectively in Finland and Sweden).
In the years since those investments, Accel’s bet has been that the growth of startups in Europe has been strong enough to increase the money it is raising to back them. Notably, the $650 million announced Tuesday is the same size as the company’s initial U.S. fund (announced December 2023). Given that the US is a considerably larger market in terms of overall venture funding and number of startups, that speaks to Accel’s confidence in what’s happening here.
“The European tech scene has really come of age,” said Harry Nelis, a long-time partner at Accel in London. Current investments include cybersecurity companies Cyera and Oasis, nursing home marketplace Lottie, and buzzy AI video startup Synthesia, among many others.
As expected from that list and recent headlines, the focus in the future will be on opportune companies that capitalize on the needs and interests of the moment. That includes those who are creating creative solutions to pressing problems (cybersecurity is a great example of this), smart commerce solutions (including marketplaces that leverage social needs), and, do I even need to write that? — AI, AI, AI.
Venture investing in the first quarter of this year, according to PitchBook research, shows slight but still encouraging signs of recovery. In total, some €16.3 billion were invested in startups across Europe in the first three months of this year. That’s more than in the first quarter of 2023, when €13.7 billion hit startups’ bank accounts, but both are many billions less than the exuberant, heady internet days of 2021 and 2022.
That drop might not be so bad in the long run: Right now the market is trying not to be brought down by the wave of startups that were generously funded at rushed valuations in years past, which are now collapsing as they find themselves. They struggle to meet their revenue projections, maintain their valuations, and are unable to exit the public markets or raise more financing.
Updated to remove Skype from startup list (Accel did not invest in it).
