Overall market up by volume of deals, but number of larger deals down. Click here to download the full report.
At Go4Venture, we have for several years been tracking European tech fundraising deals and creating a ‘Headline Transaction Index’ (HTI) based on all deals over €1m, mainly focusing on “Large” deals greater than $10m/€7.5m. Based on the number and value of transactions reported in professional publications the HTI index is an early indicator of the progression of the private market cycle for European technology companies.
Our 2016 year-end review based on the HTI data shows:
- A slow down of larger (≥€75m) deals: drop off in mega deals (≥$100m) compared to 2015 when there were 11 mega deals valued at 2.1bn; in 2016 there were 9 mega deals valued at 1.5bn.
- Growing number of substantial Series A: volume up 7% and average value up 8% from 2015.
- Rise of ‘generalist’ investors: 28 more deals included at least one generalist investor (65% of total deals).
- Fintech and marketplaces are all the rage: fintech growing by volume (+11%) and average deal size (+5%). Marketplaces are superseding ecommerce (volume of latter is down 10%).
- Overall increase in number of large deals across all European countries: excluding Sweden.
Overall market up by volume of deals, but number of larger deals down
Against all expectations the European market has been accelerating since September 2016, after a slowdown at the beginning of the year. By value the market did slow down but only due to a contraction in the value of larger deals (≥€75m). The market remains very active in the traditional European fundraising domain (€7.5m – €75m). A key trend is that the number and size of Series A rounds ≥€7.5m increased year-on-year.
The market was expected to decrease sharply in response to the repricing of the US unicorns in 2015. Ultimately, for 2016 the market ended up 31% ahead by transaction volume, and level by value. Excluding mega (≥$100m) transactions, it was 32% up in volume, and 20% up in value.
This is partly because Europe has never been exposed to unicorns to the same extent as the US. And partly also because Europe is seen as getting better at producing valuable companies, not simply great technologies.
In terms of sector, as we had highlighted in our previous article, ‘European fintech in focus: fundamentals too strong’, fintech is all the rage, as are marketplaces. Fintech is growing by volume (+11%) and average deal size (+5%). E-commerce plays are on the way down (volume = -10%), superseded by marketplaces, due to their inventory-less model.
Investors retreated from food (volume = -4%, average value = -12%), despite a handful of headline-grabbing deals. eHealth is disappointing, despite its initial promise. Horizontal technologies such as AI (artificial intelligence)/ big data are touching every sub-sector.
Europe sees Silicon Valley like Series A segment
In addition, Europe is seeing the emergence of a Silicon Valley like Series A segment. Our data shows the stepped up maturity of the European market. There is a growing number of substantial Series A transactions (volume up 7% and average value up 8%). Series B, which are supposedly under pressure, are in rude health – for the companies with the right metrics.
According to our data, Accel, Atomico and Wellington Partners are the most active investors in Series A rounds. Their lead investments include (respectively); Celonis, Job Today and Shift Technology; Bitmovin and Lilium Aviation; GTherapeutics and Uromems. The top Series A deals in our database for 2016 are Mindmaze and Sirin Labs.
For Series B rounds, Index Ventures, Idinvest and Bpifrance are the most active investors. These investors led the rounds in Movinga; Ogury, onfido and Planday; and Ynsect, respectively. The top Series B deals were for letgo and Starling Bank.
UK leading Europe, with France and Germany second neck and neck
When looking at the HTI deals in Europe by country in 2016, the UK has established a considerable lead vs all other countries. Germany is suffering from e-commerce coming to earth. And France is benefiting from the new emphasis on deep tech, since it has a strong tradition in electronics and semiconductors, particularly in the south of France.
The big news is the emergence of deals in countries not particularly know for huge numbers of tech investments – including Spain (Cabify, Letgo, Hawkers) with the highest average deal size this year followed by Portugal (Outsystems, Veniam). Likewise, investment in local tech ecosystems are enabling Switzerland, Scandinavia and Benelux to continue to punch above their weight. Sweden has seen less deals at a significantly lower value, average deal size is down by €56m.
Finally, the HTI year-end review for 2016 also highlights the top 10 largest funding rounds during the year.
Each of the top 10 deals included a generalist investor or non-VC investor.
As we have mentioned in previous bulletins, one of the biggest stories of 2016 is the rise of the generalist investor in the European tech space. We found that 166 deals included at least one generalist investor (65% of total deals). Generalist investors also lead investments, with 89 deals featuring at least one lead generalist investor (35% of total deals).
Despite the growth of generalist investors, VCs are still leading the pack with 33 more deals including VC investors and 17 more deals with a VC investor leading the round.
To download the full Go4Venture 2016 year end review, click here.
The Go4Venture Team