Deal Flow 5.0: 5 Things We Learned About European Tech Deal Terms in 2024

In 2024, despite political and regulatory challenges, Europe's talent pool reached new heights, even amid funding shortages. Venture capital investment in European startups reached over $52B last year, aligning with the market's long-term growth and stabilization despite being lower than 2023 and the peaks of 2021 and 2022.

To understand the factors driving these shifts in the landscape and their effect on deal terms, we analyzed over 375 venture capital and growth equity investments our clients completed in Europe last year. Orrick Deal Flow 5.0: 5 Things We Learned About European Tech Deal Terms in 2024

Here are five takeaways – and what they mean for deal terms in the year ahead.

1. Market stabilization led to a modest rebalancing of investment terms. Consent regimes eased as companies matured, aligning with BVCA model forms, fostering innovation by reducing restrictive practices. Founders were required to stand behind warranties in only 29% of deals in the UK due to increased adoption of the new BVCA model form documents. This aligns more closely with the U.S. practices, potentially accelerating future deal-making. Investor information rights remained important for monitoring portfolio companies, but became more flexible and were more commonly limited to larger shareholders. Lead investor board appointment rights remained vital at early stages, granted in over 80% of deals, while founder protections increased, with over 90% receiving founder board appointment rights. Companies expanded option pools, with over 70% of equity financings including a top-up, highlighting a stronger talent pool and focus on scaling.

2. We saw signs of improvement to deal volume and size. The average size of investor-side venture deals grew by 66%, while company-side deals saw a slight decline. Growth-stage funding remained limited.

3. ASAs and SAFEs outpaced debt. Increased early-stage activity and stronger Series A+ performance led to a preference for ASAs and SAFEs, which accounted for 63% of combined convertible deals. European debt providers demanded equity-like terms, prompting companies to favor extension rounds over debt.

4. Secondary transactions significantly increased. Tax changes and limited public market access boosted secondary transactions, with 30% of rounds being either a stand-alone secondary financing or rounds that included a secondary component. Founders accessed secondary transactions earlier, with some occurring as early as Series A.

5. There was strong demand across SaaS, DeepTech, AI and FinTech. SaaS & Platforms represented 21% of financings, DeepTech increased to 23%, deals with an AI and ML component maintained a 33% share, and FinTech rose to 16%.