VC firm Highland Europe raised a €1B fund, its fifth, bringing its total raised to €2.75B; PitchBook: European startup investment fell 16% YoY to €91.6B in 2022
Ivan Levingston / Financial Times :
Context & Ripple Effects
Highland Europe's €1B fifth fund lands mid-contraction: PitchBook counts European startup investment down 16% year-on-year to €91.6B in 2022, after a Q3 that was the weakest quarter since late 2020 European VC funding fell 44% year-on-year to $16B. The firm is buying into the trough, not the peak.
The corpus frames this as a recurring rhythm rather than a one-off: a comparable dip hit Europe in 2016 when quarterly investment fell from $4.3B to $2.8B and again in 2018, yet by 2025 the market had climbed back to a post-pandemic high of €66B, with AI-related deals alone worth €23.5B PitchBook's 2025 tally. Funds sized like Highland's are positioned to fund whatever leads that next leg.
First-order effects
- Highland Europe now has €1B of fresh dry powder to deploy into European startups precisely when valuations are resetting, giving it pricing leverage over founders who raised in the 2021 market.
- Limited partners committing at total-closed capital of €2.75B are effectively underwriting a multi-year deployment window across the downturn, when entry prices are lowest.
Second-order effects
- Rival European generalist firms face pressure to match the fund size or cede allocation on the continent's largest rounds, since founders now have one more deep-pocketed option in a market where aggregate funding is shrinking.
- Portfolio companies backed from this fund can outlast peers running down 2021-era cash, forcing competitors toward earlier revenue discipline or bridge terms.
Third-order effects
- If the pattern holds — contractions in 2016, 2018 and 2022 each followed by recovery, most recently to 2025's €66B high — capital keeps consolidating into fewer, larger funds that raise through the trough and capture the next sector-led upcycle, this time likely AI given its 35%-plus share of recent European deal value.
- A widening gap opens between mega-fund incumbents and sub-scale European VCs, pushing smaller firms toward niche strategies or exit.
The trend: European venture moves in roughly cyclical contractions and recoveries, but each cycle leaves capital more concentrated in a handful of firms large enough to raise billion-euro funds through the downturn.