2023 was a tough year for venture capital, but the Belgian VC landscape proved to be more robust than its European counterparts

Diegem 18th April 2024 - Venture Capital investments, capital to support start-ups or small businesses with a strong growth potential, have decreased in the past year in Europe, including Belgium, both in deal value and the number of deals. In the first edition of the Venture Capital Market Study, PwC Belgium, together with Belgium Venture Capital and Private Equity Association, shows how the decrease in Belgium was less significant compared to that in Europe. “Our unique and brand new Venture Capital Market Study, with its high participation rate among investment managers, answers further the need for transparency and clear benchmarking data in the sector,” says Lieven Adams, Deals Partner at PwC Belgium.

Together with the Belgium Venture Capital and Private Equity Association (BVA), PwC Belgium launched its first Venture Capital Market Study with the aim of creating transparency on what is common market practice within the ecosystem, and what the current investment climate and investor sentiment look like. The survey utilised insights from 35 participating investment managers, along with private and public capital market data from the financial database Pitchbook, to capture the general VC market activity by Belgian and European VCs. The participants gave their input on investment strategy, deal terms such as valuation and legal terms, as well as shared their perspectives regarding deal flow and valuation in the VC market for the years 2023 and 2024.

Lieven Adams, Deals Partner at PwC Belgium explains, “Venture capital plays a vital role in fuelling innovation, driving economic growth and transforming industries. It is the lifeblood that empowers visionary entrepreneurs to turn their ideas into reality, thus propelling society forward. The impressive participation in this survey confirms the need for transparency and clear benchmarking of data.”

Decline in VC investments

The study shows how VC volume in deals involving European VCs has decreased by more than 22% from 2022 to 2023, with the deal value dropping by approximately 38% in the same timeframe, showing significantly less activity compared to Belgian VCs.

European VCs were seen to be active in lower-value deals: from 2022 to 2023, the deal value decreased more than deal volume. In terms of deal volume, Belgian VCs were only slightly less active in 2023 compared to 2022, with a decrease of 8%. The total known deal value of deals involving a Belgian VC showed even only a decrease of 3%. Belgian VCs were active in fewer deals but these deals had a higher value. Overall, Belgian VCs seem to be less hesitant to invest than their European peers. Many VCs expressed that valuations have stabilised and they don't expect them to further decrease in the coming year.

Where are the investments coming from?

PwC Belgium’s study shows how half of the investments in venture capital funds come from private wealth, evenly balanced between money invested through family offices (25%) and high-net-worth individuals (25%). 43% of the investments comes from government and institutional capital, making them an important pillar in the Belgian VC landscape. A small minority of 7% comes from corporates and other sources. Investors find their way to deals tapping into their own network (28%) and events (24%), 18% of the leads come through incubators and 7% are generated from database searches. Clearly, most VCs prefer to actively seek deal flow themselves rather than relying on inbound emails (19%).

Where do the investments go?

B2B SaaS (16.0%) is clearly a top focus for the surveyed VCs, in addition to Industry 4.0 & Robotics (14.2%), and Mobility & Logistics (13.2%). B2B business models seem to dominate over B2C business models. More than half of the surveyed VCs allocate(nearly) all of their investments to B2B business models. In our experience, B2C models often struggle to fit within a VC strategy due to a scattered consumer market in Belgium, lack of VC knowledge and experience in B2C and lower scalability. Successful B2C startups are seen to seek other sources of funding, such as business angels, corporates or crowdfunding. ​

9 out of 10 of VCs surveyed have an average investment holding period of 5‒10 years, this being the typical closed-end horizon view for many years.

Although 5‒10 years is a substantial period of time for traditional SaaS companies, it might not be enough for innovative hardware and research-intensive companies. We believe that there is a gap for ‘patient capital’ to fill in Belgium if we want to support innovation in certain areas that need more time to grow,” says Lieven, Deals Partner at PwC Belgium.

https://www.pwc.be/en/news-publications/2024/vc-market-study.html

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About PwC Belgium

Building trust and delivering sustained outcomes

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 151 countries with more than 364,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us  what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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© 2023 PwC. All rights reserved.

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