​VCs plough €3bn into Europe's startups as Spotify swells Swedish funding

Europe's online firms shaking up traditional businesses continued to dominate venture capital financing in the second quarter of the year.

European startups landed just over €3bn from venture capital firms in the second quarter of this year - signalling total funding is rising, despite a fall in the number of deals.

According to Dow Jones VentureSource report for the second quarter, online businesses tackling traditional industries dominated the quarter's largest investments. The biggest went to Swedish music platform Spotify, which raised €489m in its seventh round this April ahead of Apple's rival Music launch. The round valued Spotify at $8.53bn.

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The Spotify round also made Sweden the second largest recipient of VC funds with a 19 percent share of all European financing during the quarter. The top destination for VC funds was the UK, where companies received €645m across a more even 89 deals, accounting for 21 percent of all European funding. Germany ranked third with €508m and 17 percent of the total, while France raised €449m in the quarter with a 15 percent share.

Following Spotify, other big rounds went to Luxembourg's online fashion group Global Fashion, the UK's peer to peer financing startup Funding Circle, and Germany's Rocket Internet-backed food delivery network Foodpanda.

Exit activity however was a little quieter in Europe in the last quarter, with 37 venture backed M&As for the quarter, while IPOs picked up with 15 VC-backed listings.

The largest M&A for the quarter was Delivery Hero's €526m acquisition of Turkey's local equivalent, Yemek Sepeti Elektronik Iletisim Tanitim. Meanwhile the largest IPO went to German online retailer windeln.de, which raised €183m from its listing on the Deutsche Börse.

A separate report recently published by KPMG and CBInsghts noted that tech companies dominated Europe's VC backed young businesses, and that the UK has established itself firmly as Europe's home of startups.

According to the firms, European VCs have shifted focus from early stage investments to lower-risk later stage funding, with the average size of the latter investment reaching $51.9m for the quarter.

The report also noted that with $6.6bn invested in startups for the first half of 2015, Europe is on track to beat 2014 totals by almost 60 percent. Europe of course is still dwarfed by the US where $37.5bn was invested in the first half of this year.

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