5 European investment trends for 2024

Compared to the peaks of 2021, European venture capital (VC) has slowed down considerably. In 2023, European VC investment totaled $63 billion, a 37% year-over-year decline.

While looking at a longer time horizon paints a more positive picture, with European VC investment totaling $43 billion in 2019, investors are wondering when activity will begin trending upwards again.

In our 2024 European investment benchmark report, we analyzed Affinity platform data on more than 450 of our European VC customers (who we refer to as “all firms”) versus those ranked as “top firms” by Dealroom’s VC Investor Ranking. 

In doing so, we uncovered five key European investment trends. Keep reading for the highlights, or view the report for an in-depth analysis with comprehensive charts and data.

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Trend 1: Engagement is on the rise for all firms

Engagement, measured by the volume of email communications, was volatile in 2023. VCs experienced a midyear dip in communication followed by a sharp uptick in Q4 2023. However, heading into 2024, all firms appeared hyper-focused on increasing their engagement with both new and existing contacts. 

For example, all firms sent and received 15%  more emails quarter-over-quarter in Q1 2024, reaching the highest level of engagement seen in the last two years. This was likely in an attempt to source new deals after a slow year.

Adam Shuaib, Partner at Episode 1 Ventures, underscores how a consistent focus on engagement can provide a competitive edge: “I think the very best funds recognize that good deals will always be able to get done, and if you want to win those deals, you need to stay ahead of the pack—and you need to be working, making introductions, and getting to know those founders when perhaps your peers or competition are not so active.”

In contrast, while top firms generated higher overall levels of engagement, they decreased their communication efforts in Q1 2024, sending and receiving 4% fewer emails quarter-over-quarter. There was a strong correlation between engagement and deal volume for top firms. As deal flow decreased in early 2024 for top firms, so did engagement.

Trend 2: All firms are focusing more on outreach 

Network growth followed a similar trend to engagement for both all firms and top firms, who saw a midyear dip in network activity—likely driven by a prioritization of deal work with existing network connections—followed by a significant rebound in Q4 2023. 

Entering 2024, all firms and top firms differed in approach yet again. While all firms grew their networks by 6% quarter-over-quarter in Q1 2024, top firms saw a 7% quarter-over-quarter decrease in new contacts. 

Top firms likely shifted their focus to maintaining and strengthening their existing relationships as deal work picked up at the end of 2023. Meanwhile, deal flow remained relatively stagnant for all firms, who were likely more focused on expanding their networks for deal sourcing.

Trend 3: The outlook for deal volume is uncertain

In 2023, top firms worked on substantially more deals than all firms—as many as 300 more deals in Q4 2023. One reason is that founders tend to favor more established firms during tougher market conditions. To learn the other factors at play, read the report. 

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The outlook for deal volume for the rest of the year is unclear. After a sharp 86% quarter-over-quarter increase in new deals for top firms in Q4 2023, deal flow fell back in line with early 2023 levels—down 22% both year-over-year and quarter-over-quarter in Q1 2024. 

With higher levels of engagement and network growth for top firms and all firms at the end of 2023, many firms seem to be taking steps to increase deal flow. However, it’s unclear whether this will translate to more deals later in the year.

Trend 4: Data is a deal sourcing differentiator 

Of the top 20 firms we analyzed, 75% have more than 50 employees, and firms of this size are much more likely to analyze more data sources to make decisions. For example, 58% of firms with more than 50 employees use seven or more data sources to evaluate their deals, whereas firms with 1-5 employees use 3 or fewer data sources. 

Alexander Ross, General Partner at Illuminate Financial, shares the types of data sources his firm evaluates at the early stages of a deal: “Right at the top of the funnel, we have a number of data sources, which typically tend to be signals like number of employees—so growth in the number of employees, mentions of certain keywords, or certain partnerships being announced—to help refocus or bring our attention back to businesses that sit on our monitor list.”

Why is it important for VCs to incorporate more data throughout the deal cycle? Doing so can drive efficiency across each investment stage and prevent firms from missing outlier investment opportunities. It can also explain why top firms are sourcing more deals than their peers—35% of data-driven VCs claim their data-driven tools are responsible for almost half of their deals sourced today. 

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Trend 5: Top firms are adapting their strategies quickly

Based on our analysis of the dealmaking activities of top firms, it’s clear that they’re quick to adjust their strategies when they aren’t paying off. 

For example, after a midyear dip in deal flow, top firms pivoted from reinforcing their existing connections to expanding their networks in Q3 2023. This shift appeared to pay off, with an 86% quarter-over-quarter deal surge in Q4 2023. 

By monitoring key metrics like network activity and engagement, firms can quantify what isn’t working and adapt their strategies quickly. 

See how your firm compares

To see how your firm’s dealmaking activities compare to your peers, get your copy of the 2024 investment benchmark report: European edition. With exclusive data on hundreds of European firms, you’ll learn:

• Performance benchmarks of industry leaders
• Three characteristics that differentiate top firms
• How to adapt your strategies to get ahead this year

Interested in the breakdown by firm size? Check out this infographic comparing smaller firms of 31-50 employees to larger firms with 50+ employees. 

It’s becoming increasingly important for VCs to build strong relationships with their connections and use data to understand where and how to course correct when strategies aren’t working. 

By investing in technologies like Affinity—the CRM built for venture capital—your firm can make more data-driven decisions and grow its networks more effectively to source more high-quality deals faster.

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