Yahoo Finance

Europe has already registered its second biggest year for new newly minted unicorns, but economic conditions are making it harder for these prized companies to hold on to their lofty valuations.

In the first three quarters of this year, 40 European companies achieved a €1 billion-plus valuation, according to PitchBook's Q3 2022 European VC Valuations Report. But while the first two quarters of 2022 saw similar levels of unicorn creation to last year, the numbers dropped off in Q3, with only 4 new unicorns created.   
Meanwhile, the value of Europe's unicorns has seen a significant rise from last year. By the end of September, aggregate unicorn post-money valuations reached €466.2 billion, up 40.7% from the end of 2021.

Appetite for the continent's most valuable companies has remained strong despite a more cautious attitude toward these expensive and often nonprofitable startups. Sixty-nine deals were completed for Europe's unicorns through the end of September, similar to 2021's activity.

But while €1 billion-plus companies may still be closing deals, the size of the rounds has shrunk, and total deal value is on track to miss last year's numbers.

The average valuation for European unicorns has also suffered slightly from the current environment. After reaching a peak of €4 billion in Q1 2022, it now stands at €3.7 billion. The average valuation was impacted by two high-profile down rounds: Klarna's 82.8% haircut and a 60% drop for fintech company SumUp.

Although more companies are joining Europe's unicorn stable, none have left this year by way of a public listing. Given the turmoil in the public markets, these companies are deciding to stay private longer rather than risk their valuations.

Featured image by Niphon Subsri/Shutterstock

This article originally appeared on PitchBook News