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European Investor Sentiment in 9 Charts

A Slush European investor survey

To put it mildly, it’s been a turbulent start to the year: inflation running wild, the war in Ukraine, and COVID-19 worries still looming in the background. The markets seem to agree as the NASDAQ 100 Index, including the largest public technology companies in the world, is down by almost 30% in 2022, compared to being up by 27% in 2021. 

As a response to the public market turmoil, we’ve seen a flood of commentary, internal VC memos, and quite frankly, gossip, going around the ecosystem. Founders have been advised to shift their focus from growing at any cost to looking at their runway, profitability, and being “default alive” – acknowledging that the fundraising landscape is not what it was 12 months ago.

To see what the actual effect of the shifted market sentiment is on startups, we decided to take a data-driven approach and ask what’s happening directly from the investors.

Why? We think that it’s important that startup founders know what’s going on instead of relying on speculation.

We surveyed 73 European investors about their investment appetite, valuations, and portfolio actions so far in H1 2022 and about their future outlook in H2. Let’s see what they had to say.


Expect to learn:


#1: Valuations are down (but not bad)


70% of surveyed investors said that they are looking to deploy capital at a 0-40% discount in H2 2022 compared to H2 2021. Only 21% said they would consider investing at a similar or higher valuation.


#2: Series A & B investors are showing the most caution in valuations


Looking at different investment stages more granularly, Series A & B investors are showing the most caution in valuations.  59% of these investors say that they are willing to fund similar deals compared to 2021 at 20-60% lower valuations. Seed stage, where the investment horizon is multiple years, is showing a slightly lower downturn – half of the investors we surveyed deploying capital at seed said they are investing at 0-20% lower valuations in H2 2022. Surprisingly, 40% of later-stage investors said they are still considering similar or higher valuations as in 2021 – even though their business is affected by the public markets the most.


#3: The number of deals is not showing signs of slowing down


While expected valuations are down, it looks like investors are still deploying capital at the same or higher pace in H2 2022 as they did in 2021 when looking at the number of deals across stages. So while as a founder you might be looking at a lower valuation, there are still a lot of investors hungry to put their money to work.


#4: Prepare to close your round slower


In 2022, you should expect more scrutiny when closing an investment round. Investors across stages are expecting to spend more time in due diligence than they did last year. The change seems to again be most prominent with investors in the Series A and B stages.


#5: Runway & path to profitability under scrutiny


So where exactly does all the extra due diligence time go? According to investors, it goes into probing your company’s financial durability and your path to profitability in these unpredictable circumstances. You can also expect a closer examination of your experience as a founder. However, don’t go pivoting just yet: only 10% of investors considered a startup’s industry to be under more scrutiny than last year.


#6: Focused between new and follow-on investments largely unchanged


Compared to the start of the COVID-19 pandemic in May 2020, investors are not shifting their focus as significantly to their existing portfolio. 63% of investors surveyed said that they are keeping their previous focus, with 8% even increasing their focus on new investments in 2022.


#7: Recruitment has slowed down significantly


Likely in an effort to extend runways, the majority of investors said that at least some of their portfolio companies have halted their recruitment. The recruitment halt was more prominent the earlier the stage of the startup. For the talent out there, the market for startup jobs might be getting a lot more competitive in the future as fewer jobs are available. For reference, in our 2020 COVID-19 survey, 27% of startups indicated that they had put recruitment on hold at the time of the survey.


#8: Little to no layoffs so far across all stages


While recruitment has slowed, the majority of this survey’s investor portfolios have survived with minimal layoffs so far this year. Across stages, at least 70% of portfolio companies have either proceeded with no layoffs or only 10% of their workforce. While indicative, this data of course doesn’t speak to the magnitude of the layoffs in the companies affected.


#9: Investors investing in the Nordics are optimistic about the exit landscape


While an exit pullback between -1.5% and -5.2% compared to 2021 is expected across  Europe, some regions are more optimistic. Investors investing in DACH and UK & Ireland are expecting a moderate increase, while those deploying capital in the Nordics have really high hopes: the number of Nordic exits is expected to grow by 7% in 2022.


Only time will tell how the startup market will play out – but we hope that this article has brought some clarity to the ecosystem surrounding uncertainty. Best of luck to all the builders out there in H2!

If there’s anything else you’d want us to shed more light on, please send us your research suggestions at
[email protected].

Insights: Elmo Pakkanen

Analysis: Ossi Tuominen & Mikko Mäntylä

Editing: Susan Hyttinen


About the sample: The research sample consisted of 73 European VC, CVC, and angel investors. 36 of the investors in the sample were Nordic-based, with 37 widely dispersed within the rest of Europe. 62 indicated a primary focus on pre-seed and seed stage startups. 30 stated a focus on series A and B, and 7 on series C and beyond. The respondents were able to indicate their focus on multiple startup stages. The sample was gathered through a survey between June 13th and 19th, 2022.