The value and number of venture capital deals fell in Europe in the first quarter as inflation and higher interest rates dampened capital deployment and companies came under pressure to reduce costs and improve margins, PitchBook said.

The value of VC deals fell 32.1% quarter-over-quarter to 11.8 billion euros ($12.90 billion), the industry analyst said in its Q1 2023, European Venture Report. The number of deals fell 19.2%.

Noting that swathes of layoffs were announced in the quarter, including cuts at major players such as Alphabet, Amazon and Meta, PitchBook said the macro-economic landscape had become more challenging for companies seeking financing.

It said an extending runway - or the amount of time between fundraisings for start-ups and growing companies - would be a key theme this year, along with further layoffs across mature venture-capital-funded businesses.

The value of exit deals for European VCs fell 69.6% quarter-on-quarter to 1.6 billion euros, it said, the lowest value since Q1 2020.

PitchBook said it expected exit activity to remain quiet for the next few quarters amid the volatility seen in public markets in the past 12 months.

(Reporting by Paul Sandle; Editing by Sharon Singleton)