Europe’s venture capital investment eclipsed €20bn for the first time ever, according to PitchBook’s 4Q 2018 European Venture Report.

Despite the 25.9% drop in deal volume year-on-year, swelling deal sizes and increased interest from non-traditional investors helped drive deal value to the high-water mark.

As an example, median early-stage deal size increased 86.9% from 2017, while late stage median deal size increased by 67.9% over the same period.

Europe’s exit market witnessed three multi-billion-dollar liquidity events in 2018 – Spotify, Adyen, and Farfetch – which sent exit value soaring to €47.4bn.

However, with 30.5% fewer exits completed than in 2017, questions arose on the exit market’s ability to ensure strong capital returns to a broader group of GPs and LPs.

To support the larger check sizes required by more mature startups, European VCs raised fewer, larger funds in 2018, as evidenced by a 0.2% year-on-year increase in capital raised and a 23.5% year-on-year decline in fund count.

For this reason, international investors, non-traditional investors, and government programmes have grown in importance as alternative sources of funding for angel and seed and early stage startups, according to PitchBook.

“Despite declines in volume across deal making, exit activity and fundraising, Europe’s VC ecosystem did sustain healthy investment levels throughout 2018 as a result of increased investor focus on targeting fewer, more mature startups,” said Cameron Stanfill, analyst at PitchBook.

“An important milestone to note was the exit market’s ability to support three multi-billion-dollar liquidity events in 2018, as it inspires investor confidence in their ability to sponsor companies through the later stages of growth.

“An area that will be watched closely in 2019 is capital availability for early stage startups, with investors raising fewer, larger funds.”