1Q 2016 European Venture Industry Report

8/18/2019 1Q 2016 European Venture Industry Report

1/12

1Q 2016

VC invested declines intandem with activity

PAGE 5 ››

Spotlight: Nordics

PAGE 7 ››

Healthy fundraising totals

PAGE 10 ››

2015

2014

2013

2012

2011

2010

20092008

2016


2/12

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COPYRIGHT © 2016 by PitchBook Data, Inc.All rights reserved. No part of this publicationmay be reproduced in any form or by anymeans—graphic, electronic, or mechanical,including photocopying, recording, taping, andinformation storage and retrieval systems—without the express written permission ofPitchBook Data, Inc. Contents are basedon information from sources believed to bereliable, but accuracy and completeness

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judgment .

Introduction 4

Overview 5

Rounds by Region & Sector 6

Spotlight: Nordics 7-8

Exits 9

Fundraising 10

1Q 2016 League Tables 11

Contents

Feature photograph in Nordics sectioncourtesy of Erik A. Drabløs, WikimediaCommons.

3

PITCHBOOK 1Q 2016 EUROPEAN VENTURE INDUSTRY REPORT

http://pitchbook.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://pitchbook.com/


4/12

European venture

activity slows furtherIntroduction

European venture investment continued to decline in the rst quarter of

2016, not only due to intensifying macro and political concerns but also the

slowing of the VC cycle worldwide. To some degree, European startups were

insulated from the extremes of the cycle that is ongoing in the U.S., in terms

of massively inated late-stage activity, but they weren't wholly unaffected.

Although gures for VC investment in Europe-based companies may inch up

a bit further even for 1Q, it's clear that any potential hangover among VCs,

on top of the array of other risk-inducing factors, will lead to a subdued year

for VC activity across the continent. Further legislative efforts on a regional

basis, as well as the still-apparent promise of the Capital Markets Union

becoming reality, may shake up the current barrier-abounding environment

to some extent. The boom of VC invested from 2014 through 2015 may also

encourage future entrepreneurial activity as employees leave to found their

own ventures. It's also undeniable that quite a few venture rms are still seeing

success on the fundraising trail, leading to substantial sums of capital awaiting

deployment. Thus, when all is said and done, there are enough positive factors

for European venture activity that this year may not see a dramatic decline in

investment. Numbers will be subdued, relative to the last handful of years, as

larger economic concerns remain to be resolved and the venture investment

shakeout continues, but it isn't so much a time for alarm as for shrewd caution.

GARRETT JAMES BL ACK

Senior Analyst

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5/12

Activity by both count and value slidesOverview

Source: PitchBook

*As of 3/31/2016

Slowest quarter in nearly four years

European VC activity

In some ways, top-level European

venture trends mirror those in

the U.S. currently. Especially when

foreign investors are taken into

€ 3 .

0

€ 6 . 4

€ 4 . 5

€ 3 . 9

€ 5 . 8

€ 5 . 9

€ 7 . 1

€ 7 . 5

€ 9 . 6

€ 1 3 . 4

€ 2 .

4

855

1,214 1,365

1,407

1,888

2,289

2,778

3,3963,756

3,005

523

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Deal value (€B)

# of deals closed

Investors are still willing to inject signicant sums in

late-stage rounds

European VC invested (¤B) by round size

Late-stage activity remains most resilient, relatively

speaking, while earlier deals plummet

European VC rounds (#) by stage

237

197

890

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Angel/Seed

Early VC

Late VC

Source: PitchBook

*As of 3/31/2016

€0.0

€2.0

€4.0

€6.0

€8.0

€10.0

€12.0

€14.0

€16.0

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6 *

€25M+ €10M-€25M €5M-€10M

€1M-€5M €500K-€1M Under €500K

Source: PitchBook

*As of 3/31/2016

account, there remains plenty of

institutional capital looking for

opportunities throughout the

Eurozone, which is one reason why a

fair number of late-stage rounds still

closed in 1Q 2016. But it's clear that

as activity overall slides—particularly

at the early stage—VCs are pulling

back in the face of increased risk

and consequently fewer worthwhile

opportunities. As opposed to last

year, this slide is now matched by a

slowdown in euros invested, signaling

increased perception of risk. On

a quarterly basis, the number of

completed venture rounds in Europe

declined by nearly 23%, while total

value returned to numbers more

akin to those seen in 2014. Faced

with greater macro uncertainties

in addition to familiar challenges

such as fragmented markets and

regionalized access to capital, there

are more obstacles for both founders

and VCs than in the U.S. At the same

time, the European startup scene

did not overheat nearly as much, so

any coming correction owing to that

won't be as signicant a detriment.

All in all, 2016 is shaping up to

resemble 2012 in terms of activity.

5



6/12

The U.K. & Ireland saw a steep

plunge in venture nancing activity

from 4Q 2015 to 1Q; in fact, the region

saw the smallest tally of completed

deals for a single quarter since 2Q

Healthcare is on pace to record a similar sum as seen

in 2015, although software garnered the most

European VC rounds (¤) by sector

Most sectors slumped, yet healthcare and pharma &

biotech proved slightly more stable

European VC rounds (#) by sector

As activity plunges, France/Benelux & GSA prove resilient

Rounds by region & sector

Source: PitchBook

The U.K. & Ireland have been hit hard, although other, more troubled regions saw relatively greater decreases

European VC activity by region

2011. An uptick in caution among

VC rms could be one contributing

factor, but it's also highly probable

that the Brexit wild card is spooking

investors. Access to customers could

be curtailed for at least some time,

while regulatory burdens would

remain unclear and difcult to

navigate. We've seen a handful of VC

surveys indicate talent retention and

recruiting, should the U.K. exit the

EU, could become more difcult, as

visa processes get reworked. Last but

not least, the implications for taxes,

particularly on investment capital,

remain unknown. Hence the decline

in U.K. & Ireland startup nancings,

although it's worth noting that on the

mainland, venture investors are still

plying companies in France/Benelux

and GSA at fairly healthy rates,

comparable at least to 2012 levels.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2011 2012 2013 2014 2015 2016

U.K./Ireland

Southern Europe

Nordic Region

GSA

France/Benelux

Central & Eastern

Europe

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6 *

Commercial

ServicesConsumer Goods &

Recreaton

Energy

Healthcare

Svcs/Suppl./Syst.

IT Hardware

Media

Other

Pharma & Biotech

Sofware

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6 *

Commercial

ServicesConsumer Goods &

Recreaton

Energy

Healthcare

Svcs/Suppl./Syst.

IT Hardware

Media

Other

Pharma & Biotech

Sofware

Source: PitchBook

*As of 3/31/2016

Source: PitchBook

*As of 3/31/2016

6



7/12

After such heights, isn't a slowdown to be expected?

Nordic VC rounds

Spotlight: NordicsOverview of VC activity in the Nordics

Even removing Spotify's massive

late-stage financing from last

year's tally leaves the Nordic region

at more than ¤1 billion invested in

venture rounds. Consequently, the

¤230 million invested in the first

quarter of 2016 isn't as much of a

slowdown in money deployed as

it may appear, but rather slightly

over historical quarterly averages.

Activity is off pace, of course, as is

the case across the venture industry

worldwide. The fact the Nordic

region simply saw less overheating

is why the rate of investment hasn't

slowed quite as dramatically as

elsewhere, although investor wariness

is clear. That is also attributable

to sustained local activity. As the

portion of overall activity with U.S.-

based investor participation slid

over the past few years, even though

venture investment totals steadily

climbed, regional investors ramped

up correspondingly. Unaffected to

the extent that U.S. VC firms have

been by overly optimistic valuations,

Nordic or even Northern and Western

European VCs in general have

found more cause to maintain their

investing pace, if even at a slightly

subdued level relative to the past

three years. There was some minor

swelling of investment sizes, as the

increase in larger rounds indicates

€ 0 .

4

€ 0 .

5

€ 0 .

6

€ 0 .

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€ 0 .

5

€ 0 .

6

€ 0 .

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€ 0 .

8

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9

€ 1 .

5

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2

132

183 176 186

265

293318

377 369 378

76

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Deal value (€B)

# of deals closed

Source: PitchBook

*As of 3/31/2016

Fewer nancings with U.S. participation speak to growing local strength

Nordic VC rounds with U.S.-based investor participation

66.1%65.8%

60%

65%

70%

75%

80%

20 06 2 007 20 08 2 009 20 10 2 011 20 12 2 013 20 14 20 15 2 016 *

% of deals with U.S.-based investor parcipaon

Source: PitchBook

*As of 3/31/2016

7

PITCHBOOK 2015 ANNUAL EUROPEAN VENTURE INDUSTRY REPORT


8/12

Amid a slowdown, pharma & biotech startups have

been able to grab most of the capital invested so far

Nordic VC deals (¤B) by sector

Activity remains primarily concentrated in software

and healthcare-related niches

Nordic VC deals (#) by sector

A few large rounds have bolstered capital invested

considerably

Nordic deals (¤B) by size

Over 60% of all rounds in 1Q were ¤1M or more in size,

a percentage likely to slide as the year goes on

Nordic VC deals (#) by size

below. Given how interest in certain

sectors—such as fintech—that have

strong footholds in the Nordics has

skyrocketed as of late, some degree

of round inflation was bound to

occur, particularly on a sector-by-

sector basis. The concentration of

capital invested in software is to

be expected, accordingly, although

the success of biotechs in 2016

to date should be noted. Nordic

fintech in particular has only grown

more alluring to investors, given the

potential inherent in the Eurozone's

fragmented payments market as well

as strong institutional support, as

evidenced by Nordea Bank launching

an accelerator program for fintech

startups last year. Such promising

factors are why 1Q 2016 still saw a fair

proportion of rounds at or exceeding

¤5 million in size. Investors,

particularly of the domestic variety,

still are willing to offer substantial

sums. Going forward, activity should

proceed at a dampened level, similar

to what we observed before the

boom period of 2013-2015. Increased

apprehension is here to stay, but

positive factors such as the krone's

weakness and relatively strong

Swedish growth will help assuage

fears of broader economic troubles

affecting local companies.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6 *

€25M+

€10M-

€25M

€5M-€10M

€1M-€5M

€500K-€1M

Under

€500K

Source: PitchBook

*As of 3/31/2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6 *

€25M+

€10M-

€25M

€5M-€10M

€1M-€5M

€500K-€1M

Under

€500K

Source: PitchBook

*As of 3/31/2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6 *

Commercial

Services

Consumer Goods &

Recreaton

Energy

Healthcare

Svcs/Suppl./Syst.

IT Hardware

Media

Other

Pharma & Biotech

Sofware

Source: PitchBook*As of 3/31/2016

0%

10%

20%

30%

40%

50%

60%

70%

80%90%

100%

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6 *

Commercial

Services

Consumer Goods &

Recreaton

Energy

Healthcare

Svcs/Suppl./Syst.

IT Hardware

Media

Other

Pharma & Biotech

Sofware

Source: PitchBook*As of 3/31/2016

8



9/12

A temporary slowdown?European VC-backed exits

Although conditions that have

encouraged M&A over the past few

years remain in place, volatility and

uncertainty around growth forecasts

have contributed to a slowdown in

the buying of VC-backed startups

in Europe. Corporate buyers look

to venture portfolios for innovative

technology and talent, not somuch potential synergies that an

established business would provide.

But in the current environment,

strategic acquirers are dialing back

activity as they assess opportunities

more carefully. Some of the more

attractive opportunities in terms of

innovation have seen their valuations

climb, and, given how much they

may be spending, might be just

costly enough that potential buyers

are taking their time to thoroughlyvet prospects. As for IPOs, general

uncertainty still plagues public

markets, discouraging those looking

to debut, although not nearly to the

extent seen in the U.S.

1Q was considerably off-pace, more in line with early 2013 totals

European VC-backed exits

Currently, the slowdown is more attributable

to increased caution, as potential buyers

assess prospects more rigorously.

€ 5 .

3

€ 7 .

8

€ 2 .

8

€ 1 .

9

€ 3 .

4

€ 5 .

5

€ 3 . 3

€ 9 .

5

€ 1 0 .

9

€ 1 2 .

4

€ 1 . 2

207241

195

155

252279

323

361

480439

71

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Exit value €B # of exits closed

Source: PitchBook

*As of 3/31/2016

0

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Acquisiton IPO Buyout

Interestingly, 1Q saw M&A only just barely outpace

buyouts in terms of exit value

European VC-backed exits by type

Only a handful of VC-backed IPOs occurred in 1Q, part

and parcel of overall VC trends

European VC-backed exits (#) by type

€0

€2

€4

€6

€8

€10

€12

€14

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Acquisiton (€B) IPO (€B) Buyout (€B)

Source: PitchBook

*As of 3/31/2016

Source: PitchBook

*As of 3/31/2016

9



10/12

Trending larger, but smaller opportunities remainFundraising

2016 started off strong for VC

fundraisers, with ¤3 billion collected

across 17 vehicles. As the breakdown

by size reveals, a bevy of large funds

Thus far, 2016 is exhibiting strong fundraising numbers

European VC fundraising by year

€ 5 .

5

€ 5 .

7

€ 8 .

5

€ 3 .

1

€ 6 .

3

€ 5 .

2

€ 4 .

9

€ 4 . 6

€ 5 .

5

€ 7 .

9

€ 3 .

0

113

105

146

111

121130

110

98

81

55

17

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Capital raised (€B) # of funds closed

Source: PitchBook

*As of 3/31/2016

Even if the numbers decline as the year wends on, the

elevated median indicates bigger rms remain active

Median & average European VC fund size (¤M)

The hefty total of capital raised is primarily due to a

handful of large pools closing

European VC funds (#) by size

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 0

0 6

2 0

0 7

2 0

0 8

2 0

0 9

2 0

1 0

2 0

1 1

2 0

1 2

2 0

1 3

2 0

1 4

2 0

1 5

2 0 1

6 *

€1B+

€500M-€1B

€250M-

€500M

€100M-

€250M

€50M-

€100M

Under €50M

Source: PitchBook

*As of 3/31/2016

€85

€97

€157

€175

€0

€20

€40

€60

€80

€100

€120

€140

€160

€180

€200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Median Average

Source: PitchBook

*As of 3/31/2016

were responsible for the surge in

capital raised, ranging from Index

Ventures' two vehicles to Creandum

IV. As we've previously stated, this

further testies to limited partners

exhibiting increased selectivity and

bias toward entrusting larger rms

with their money, particularly given

their advantages in investing across

fragmented markets. Accordingly, it's

important to note that even as the

majority of commitments in terms of

euros has been owing to bigger and

bigger funds, in last quarter alone

nine funds of ¤100 million or less

were closed. There is considerable

enthusiasm around seed funding

opportunities in pockets around

Europe, particularly as waves of

talent that have beneted from

the recent venture boom go on to

start their own companies. Granted,

past years have still seen a primary

trend toward larger funds, which

possess considerable advantages in a

fragmented market such as Europe's,

but that doesn't preclude seed

funds from being able to nd viable

opportunities.

10



11/12

League tables1Q 2016

High-Tech Gründerfonds 8

Finnvera Venture Capital 4

Kima Ventures 4

Seedcamp 4

Parkwalk Advisors 3

Speedinvest 3

Funding London 3

IBB Beteiligungsgesellschaft 3

Heilemann Ventures 2

Innovationsstarter Hamburg 2

Lifeline Ventures 2

Evonik Venture Capital 2

Catapult Ventures Group 2

Balderton Capital 2

Almi Invest 2

Cambridge Angels 2

Techstars 2

Sunstone Capital 2

Voltage Ventures 2

Patrick Joy 2

Seventure Partners 2

Point Nine Capital 2

Index Ventures 2

Oxford Sciences Innovation 2

IQ Capital Partners 2

Most active seed-stage investors by

round count

Kima Ventures 11


High-Tech Gründerfonds 5

Holtzbrinck Ventures 5

Imperial Innovations Group 5

Index Ventures 5

Partech Ventures 5

IDInvest Partners 4

Caixa Capital Risc 4

Atomico 4

e.ventures 3

Midven 3

JamJar Investments 3

IBB Beteiligungsgesellschaft 3

Funding London 3

b-to-v Partners 3

Participatiemaatschappij

Vlaanderen3

Notion Capital 3

Octopus Investments 3

Ventech 3

Sonnova Partners 3


German Startups Group 3

IDInvest Partners 3

Salesforce Ventures 3

Inventure 2

MMC Ventures 2

Notion Capital 2

Finnish Business Angels Network 2

Eden Ventures 2

IQ Capital Partners 2

Orange Digital Ventures 2

Accel Partners 2

Archangels Informal Investment 2

Balderton Capital 2

Bayern Kapital 2

Orrick Herrington & Sutcliffe 10

Cooley 4

DLA Piper 3

Olswang 2

Weil, Gotshal & Manges 2

Jones Day 2

Wilson Sonsini Goodrich & Rosati 2

Walker Morris 2

Hill Dickinson 2

Goodwin Procter 2

Gunderson Dettmer 2

Cuatrecasas, Gonçalves Pereira 2

Most active early-stage investors by

round count

Most active late-stage investors by

round count

Most active law rms by round count

Source: PitchBook

Source: PitchBook

Source: PitchBook

Source: PitchBook

11



12/12

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1Q 2016 European Venture Industry Report

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Transcript of 1Q 2016 European Venture Industry Report