Despite a year marked by political and regulatory turmoil, venture capital investment in European startups reached a significant milestone, surpassing $52 billion in 2024. According to a new report by global law firm Orrick, the market has stabilized, reflecting a gradual rebalancing of investment terms after the extreme highs and lows of the pandemic era.

The report, titled "Dealflow," analyzed over 375 VC and growth equity investments in Europe last year, revealing several key trends and takeaways. One notable development is the increasing adoption of the British Venture Capital Association's new model form documents in European deals, which tend to align more closely with U.S. practices. This emerging standard is expected to accelerate future deal-making, as it simplifies the process by providing a familiar structure for all parties involved.

Another trend highlighted in the report is the expansion of option pools, with over 70% of equity financings including a top-up. This suggests a stronger European talent pool and a focus on scaling companies rather than selling early. Additionally, there were signs of improvement in deal volume and size, with the average size of deals growing by 66% and company-side deals still representing the majority.

However, the report also notes that Europe remains constrained in the number and amount of growth-stage funding deals. While the region is well-served for early-stage funding, later-stage and growth-stage funding opportunities are scarcer. This imbalance is a challenge that European startups must navigate in order to achieve sustained growth and success.

In terms of deal types, equity-based deals were stronger than debt-based deals, with companies preferring extension rounds over debt rounds. The two most common types of equity-based deals emerging in this instance are ASAs (Advanced Subscription Agreement) and SAFE (Simple Agreement for Future Equity). Furthermore, some 30% of rounds were either a stand-alone secondary financing or rounds that included a secondary component, with founders accessing secondary transactions earlier in the funding stage.

The report also provides insight into the types of startups receiving funding, with SaaS or platform-based business models representing 21% of financings, DeepTech increasing to 23%, deals with an AI and ML (machine learning) component maintaining a 33% share, and FinTech rising to 16% of European deals. These figures reflect the diversity and innovation of the European startup ecosystem, as well as the ongoing importance of technology and digital transformation in driving growth and progress.

In conclusion, the $52 billion milestone in European startup funding is a testament to the region's talent pool and entrepreneurial spirit. While challenges persist, the market's stabilization and growth trajectory suggest a bright future for European startups. As the industry continues to evolve, it will be important to monitor these trends and developments, and to explore ways to address the remaining gaps in growth-stage funding and other areas.