2024 European Venture & Growth Outlook

1. Will central banks’ easing cycle be driven by disinflation or recession? Lazard’s market strategists expect a ‘soft’ economic landing in 2024. This scenario could catalyze a change in risk sentiment, leading to multiple expansion in the public markets, and creating an improved backdrop for higher risk assets, with a greater equilibrium between growth-profit. Recession and geopolitical factors are among the downside risks.
   
   
2. Will liquidity across the venture & growth capital cycle improve? A key challenge over the past 18 months has been the recycling of invested capital, driven by the fall in primary issuance and lower exit volumes. Heading into 2024, a growing IPO backlog and signs of increased strategic and sponsor participation could help increase levels of DPI. In turn, this may encourage European venture-backed companies and investors to return to the equity funding market.
   
   
3. Will funding into hard technologies continue to gain momentum? The European venture & growth market stabilized into the second half of 2023, running at around $8 billon per quarter. Headline figures benefitted from large Energy Transition funding rounds, and we believe we may be undergoing a secular investment shift toward areas such as Clean Energy, AI and Life Sciences. The long duration of venture and growth capital means the asset class could be an important source of funding across these disruptive technologies.
   
   
4. To what extent will sectors with lower 2023 activity recover? After leading the market through 2020 to 2022, European FinTech and Software deal value was down around 80% year-on-year in 2023. In 2024, many companies across both sectors may return to the equity market, with fundamentals better matching valuations and signs of lower availability of venture debt financing. Increased activity in FinTech and Software could drive a broad-based funding recovery in 2024.
   
   
5. Will AI continue to dominate the larger funding rounds and which other verticals will outperform? In our view, AI may have catalyzed the largest platform shift since cloud computing, and we might see activity progressively broaden across the AI value stack. Other areas of potential activity include adjacent DeepTech verticals, Life Sciences, climate technologies, cost-focused SaaS applications and vertical software.

Click here to read VGB's 2024 European Venture & Growth Outlook.