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State of Belgian Capital raising – Q1 2023 update

In recent months, the global fundraising landscape has been engulfed in chaos, with market fluctuations sending shockwaves throughout the industry. The fourth quarter of 2022 already experienced a massive plunge in both transaction volume and capital raised. Notable 2022 trends such as inflation, interest rates, and plummeting valuations continue to shape the market in 2023.

However, the most notable event that sent tremors across the entire tech community was the dramatic downfall of Silicon Valley Bank (SVB). This unforeseen catastrophe left an indelible mark on Q1 2023's fundraising performance.

The figures for Q1 2023 paint a bleak picture, with a mere €118 million raised across 26 transactions, representing a staggering 68% decrease compared to the same period in the previous year. When contrasted with the last quarter of 2022, which saw €270 million raised, the decline stands at an alarming 56%. The stormy seas of the global fundraising market show no signs of calming, leaving many to wonder what lies ahead for the industry.

A bump in the road?

The burning question now is whether this downturn is merely a temporary hiccup, with delayed deals set to close in the coming months, or if it signals a more deep-rooted, structural trend for 2023.

For later-stage deals, it's entirely possible that founders, witnessing the decline in valuations and nurturing hope for a brighter future, opt to delay capital raises. However, they will inevitably need to secure new funding—though the precise timing remains uncertain. In response to these market conditions, there has been a renewed emphasis on cash efficiency and extending the financial runway, which could see this trend persist for several more quarters. Moreover, earlier-stage deals are experiencing more drawn-out processes or, in some instances, failing to materialize altogether.

When examining average round sizes, the most significant impact is observed in later-stage deals, as anticipated. The largest transactions have been delayed, with no major €20 million+ deals recorded in Q1 2023. As for Series A funding, the data remains inconclusive due to the limited number of data points, which only include Henchman, Byteflies, and Hammer-IMS. Interestingly, Seed round sizes have experienced an increase, averaging €1.2 million compared to Q1 2022. This shift reflects a structural trend towards larger Seed rounds. However, it's worth noting that the €1.2 million figure represents a slight decline from Q4 2022, when the average Seed round size reached €1.3 million.

Current projections suggest the sluggishness in the market may persist for at least three more quarters, with the fundraising landscape only anticipated to recover in 2024. As uncertainty continues to shroud the industry's future, both investors and founders find themselves grappling with tough choices and preparing to navigate the unknown.

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