Read Arma’s view on the rise of growth equity funding rounds and whether growth equity’s accelerated growth is sustainable in the future in full on Forbes here.
We have seen a significant increase in the volume of growth equity investments into digital-centric companies.
In the past two years, we have seen a significant increase in the volume of growth equity investments into digital-centric companies. This has been driven by a low-yield environment channeling investor capital into higher-risk, higher-return asset classes such as growth equity and venture capital. Simultaneously, homeworking and lockdowns generated greater reliance on digital services such as e-commerce marketplaces and online education platforms, driving PE and VC interest.
With these sectors booming, the number of growth equity investors competing to invest in them reached record highs. The number of specialist growth funds jumped from 544 to 604 in 2020, data from Preqin has shown, firmly establishing growth equity as an important component of the investment landscape.
The number of specialist growth funds jumped from 544 to 604 in 2020, data from Preqin has shown, firmly establishing growth equity as an important component of the investment landscape.
These factors have allowed growth equity-backed companies to reach higher valuations, in turn enticing more companies to raise this type of financing and driving an increase in the number of transactions, in both Europe and the rest of the world.
Another trend we have seen is the increasing frequency of supersized funding rounds, especially for companies benefitting from pandemic-altered consumer lifestyles. For example, Wolt, a Helsinki-based food delivery service, raised $530 million in growth capital in January 2021, and Delivery Hero brought a $235 million minority stake in Gorillas, the Berlin-based grocery delivery company.
But is the trend sustainable? There are certain factors we see as having the potential to slow the inflow of capital.

Firstly, increased inflation will likely lead to central bank rate hikes, reducing liquidity in the market, applying downward pressure to valuations in future funding rounds and causing investors to write down the value of their holdings. Secondly, the emergence of SPACs has provided an attractive alternative to private capital – albeit it seems that the “SPAC boom” has subsided for now.
We still believe that the emergence of growth equity as a leading asset class in Europe will persist, despite the further economic volatility expected and the unpredictable impact of new technologies. There are grounds for cautious optimism about the future of growth equity, particularly among those managers who have weathered similar storms in the past.