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Venture Capital in Europe & Israel: June to September 2014

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An overview of European & Israeli Venture Capital investment data for the fourth months ended September 2014

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Venture Capital in Europe & Israel: June to September 2014

  1. 1. Venture Capital in Europe & Israel Venture Investment Data: June to September 2014 Prepared by Gil Dibner @gdibner blog: yankeesabralimey View from Mont Blanc, highest point in Europe
  2. 2. The data • In June, I decided I wasn’t happy with available data sources on VC rounds in Europe & Israel, and that I’d need to build my own • The data in this report consists entirely of data I’ve gathered manually based on publically available, free sources • No paid data sources or API calls were harmed in the making of this dataset, every investment was manually classified • This allows analysis of some aspects of the data I consider important – aspects that don’t appear in other data sources • Seed investment is probably grossly under-reported in this approach @gdibner blog: yankeesabralimey 2
  3. 3. The pace of venture investment • During the four months ended September, 2014, there were 157 reported venture investments across Europe & Israel • A total of $2.106B was invested in Europe & Israel during this period, an average of $526M per month • Average pace seems to be around 40 investments per month • There was a summer slowdown in August in the number of transactions 449 478 565 614 44 41 32 41 0 100 200 300 400 500 600 700 800 900 1,000 0 5 10 15 20 25 30 35 40 45 50 Jun Jul Aug Sep Amount invested (US $M) Number of investments VC Investments in Europe & Israel, June-September 2014 Invested amount (US $M) Number of investments @gdibner blog: yankeesabralimey 3
  4. 4. 70 97 57 65 108 103 60 168 262 171 342 26 100 104 350 0 100 200 300 400 500 600 700 Jun Jul Aug Sep Amount Invested (US $M) Pace of VC Investment in Europe and Israel, Jun-Sep 2014 Mega (>100) Growth (20-100) Venture (8-20) Early Venture (2-8) Seed (<2) Three mega-rounds skew the investment totals • This analysis breaks down the investments into brackets by size: • Seed (less than $2M) • Early venture ($2-8M) • Venture ($8-20M) • Growth ($20-100M) • Mega ($100M+) • Three mega-rounds took place in Europe in the past four months: • French ride-sharing marketplace BlaBlaCar raised $100M • Spanish voting software company Scytl raised $104M • German food delivery company DeliveryHero raised $350M • Adjusting for mega-rounds, investment volume was lowest in September @gdibner blog: yankeesabralimey 4
  5. 5. Number of investments, by bracket • Based on the way I’m gathering data, seed deals are likely to be the under- reported • On this slide, Europe’s summer holiday effect comes into sharpest relief • Angel and venture investments, which take the least time to close, were at their lowest in August • Growth investments, which take longer to close, were at their lowest in September – probably reflecting the fact that deal teams were on holiday in August 9 6 3 4 17 21 14 17 10 8 5 16 8 5 7 1 0 5 10 15 20 25 30 35 40 45 50 Jun Jul Aug Sep Amount Invested (US $M) Number of investments in Europe and Israel by bracket, Jun-Sep 2014 Growth (20-100) Venture (8-20) Early Venture (2-8) Seed (<2) @gdibner blog: yankeesabralimey 5
  6. 6. Average round size, by bracket • Within each bracket, round sizes have remained relatively stable 4.1 4.6 4.1 3.8 10.8 12.9 11.9 10.5 32.7 34.2 48.9 26.0 0 10 20 30 40 50 60 Jun Jul Aug Sep Amount Invested (US $M) Average investment size in Europe and Israel by bracket, Jun-Sep 2014 Seed (<2) Early Venture (2-8) Venture (8-20) Growth (20-100) @gdibner blog: yankeesabralimey 6
  7. 7. Total venture investment by country, June-September 2014 • Germany led Europe with the total amount of venture dollars invested. This figure includes DeliveryHero • This analysis does not include Russia, Turkey, Ukraine, or other FSU states US $M Germany, 642.4 UK, 461.1 Israel, 443.3 Spain, 160.9 France, 124.8 Sweden, 96.4 Finland, 45.8 Ireland, 42.0 Norway, 30.0 Netherlands, 29.6 Denmark, 9.3 Czech, 7.2 Iceland, 6.0 Poland, 3.0 Switzerland, 2.0 Portugal, 1.5 Italy, 0.5 @gdibner blog: yankeesabralimey 7
  8. 8. Average venture round sizes, by country • French companies seem to raise the largest early venture rounds, but the smallest venture rounds • DACH venture rounds are, on average, 50% larger than French venture rounds Benelux, 2.5 Benelux, 12.0 DACH, 4.2 DACH, 12.7 France, 4.9 France, 8.2 Iberia, 4.7 Iberia, 9.0 Israel, 4.1 Israel, 11.9 Nordic, 4.4 Nordic, 11.0 UK & Ireland, 4.1 UK & Ireland, 10.3 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Early Venture (2-8) Venture (8-20) Amount Invested (US $M) Average investment size in Europe and Israel by bracket, Jun-Sep 2014 Benelux DACH France Iberia Israel Nordic UK & Ireland @gdibner blog: yankeesabralimey 8
  9. 9. Total venture investment by region, June-September 2014 • By region, DACH leads in terms of total venture investment dollars, driven by DeliveryHero • When the data is grouped by region, the significance of the Nordic region becomes apparent • Note that Israel and the Nordics rank ahead of Iberia and France, despite the existence of one mega- round in both Iberia and France DACH, 644.4 UK & Ireland, 503.1 Israel, 443.3 Nordic, 187.5 Iberia, 162.4 France, 124.8 Benelux, 29.6 East. Eur., 10.2 South. Eur., 0.5 @gdibner blog: yankeesabralimey 9
  10. 10. Total venture investment by region, June-September 2014 (excluding mega-rounds) • When the data is presented excluding the three mega- rounds, UK & Ireland rises to the top of the regional ranking • Israel is in second place, nearly equaling the UK & Ireland in total venture capital invested • DACH and the Nordics are in the third and fourth slots • Even with Scytl’s mega- round removed from the analysis, Iberia is in fifth place, with nearly double the invested capital of both Benelux and France UK & Ireland, 503.1 Israel, 443.3 DACH, 294.4 Nordic, 187.5 Iberia, 58.4 Benelux, 29.6 France, 24.8 East. Eur., 10.2 South. Eur., 0.5 @gdibner blog: yankeesabralimey 10
  11. 11. Rounds by bracket & country • UK & Ireland was the most active region in terms of the number of deals • Impressively, Israel had more venture rounds than the UK, and almost as many growth rounds • The Nordic region saw more investment rounds than DACH, driven primarily by much higher numbers of early venture and venture rounds 11 9 4 7 5 2 1 1 1 31 24 16 6 5 6 1 2 12 16 9 5 2 1 4 9 8 4 7 1 0 10 20 30 40 50 60 70 UK & Ireland Israel Nordic DACH France Iberia Benelux East. Eur. South. Eur. Number of investments Number of investments in Europe and Israel by bracket, Jun-Sep 2014 Mega (>100) Growth (20-100) Venture (8-20) Early Venture (2-8) Seed (<2) @gdibner blog: yankeesabralimey 11
  12. 12. Investment by region, by bracket • In terms of dollars invested, UK & Ireland and Israel were by far the two biggest draws for venture capital, each with around $150M invested per month • The DACH and Nordic regions formed a clear second tier, each with around $90M invested per month • It’s interesting to note that Israel skews significantly more early-stage than UK & Ireland • Similarly, the Nordics skew significantly more early- stage than DACH 127 98 25 71 28 124 190 64 99 48 346 283 250 171 30 350 104 100 0 100 200 300 400 500 600 700 800 UK & Ireland Israel DACH Nordic Iberia Benelux France East. Eur. South. Eur. Total amount invested (US $M) Investment in Europe and Israel by bracket by country, Jun-Sep 2014 (ranked excluding mega-rounds) Mega (>100) Growth (20-100) Venture (8-20) Early Venture (2-8) Seed (<2) @gdibner blog: yankeesabralimey 12
  13. 13. Participation rate of US VC firms, by bracket • US VC firms are active in the European and Israeli VC markets • US VC firms participated in 20% of the rounds that took place in the four months ended September 2014 • US VCs participated in only 10% of seed and early venture rounds, and in less than one quarter of venture rounds • US VCs get far more active in the later stages: over half of growth rounds, and two of three mega-rounds during this period had US VC participation 90% 90% 78% 45% 33% 10% 10% 22% 55% 67% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Seed (<2) Early Venture (2-8) Venture (8-20) Growth (20-100) Mega (>100) Total amount invested (US $M) Did US VC firms participate in European & Israeli VC rounds? Yes No @gdibner blog: yankeesabralimey 13
  14. 14. Participation of US VC firms by country • US VCs firms were active in 10 different European countries • US VC firms were most active in Israel, where they participated in 19 investment round, more than twice as many as either Germany or the UK 19 7 6 3 2 2 40 17 54 11 11 8 3 3 12 6 2 2 2 0 10 20 30 40 50 60 70 Number of VC investments In which countries are US VCs most active? June to September, 2014 No US VC involved US VC involved @gdibner blog: yankeesabralimey 14
  15. 15. US VC firms follow Tier 1 firms • US VC firms are three times more likely to participate in rounds alongside Tier 1 investors 88% 68% 12% 32% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% No tier 1 fund involved Tier 1 fund involved Number of VC Invesments US VC involved No US VC involved @gdibner blog: yankeesabralimey 15
  16. 16. A 3-dimensional approach to sector mapping Dimension Categories Explanation/Example 1. Target market Consumer, SMB, Enterprise, Government, Telecom, OEM What sort of customer does the company target? 2. Vertical market Adtech, Communications, Data, Development, Durables, Education, Electronics, Employment, Energy, Fashion, Financial, Food, Gaming, Health, HMI, Industrial, Infrastructure, Lifestyle, Logistics, Marketing, Media, Productivity, Real Estate, Security, Sports, Storage, Transportation, Travel, Water What type of problem does the company solve? 3. Business model Commerce, Components, Content, Marketplace, SaaS, Semiconductors, Services, Software, Systems, How does the company make money? What are customers paying for? Combined segment descriptor Consumer + Travel + Marketplace AirBnB has built a travel-related marketplace for consumers 16
  17. 17. What target markets are attracting the most VC investment in Europe & Israel? • Consumer-oriented companies accounted for more than half of the VC investment in Europe & Israel • Enterprise-oriented companies accounted for roughly one third of the VC investment in Europe & Israel Consumer, 1,140, 54% Enterprise, 641, 31% Government, 113, 5% OEM, 89, 4% SMB, 107, 5% Telecom, 17, 1% European & Israeli venture financing by target market June to September, 2014 (in US $M) @gdibner blog: yankeesabralimey 17
  18. 18. Breakdown by region & target market • VC investments in DACH very dominated by consumer-oriented companies • The Israeli VC landscape is dominated by non- consumer companies • UK & Ireland and Nordic region very diversified 650 242 99 148 49 123 26 206 430 106 20 20 25 106 56 104 40 46 0 100 200 300 400 500 600 700 800 DACH UK & Ireland Israel Nordic Iberia France Benelux East. Eur. South. Eur. Total amount invested (US $M) Investment in Europe and Israel by target market by country June to September 2014 (US $M) OEM Government Telecom SMB Enterprise Consumer @gdibner blog: yankeesabralimey 18
  19. 19. Distribution of investment rounds by country • Across Europe & Israel, 43% of VC investment rounds were in consumer companies • More than half the financing rounds in DACH & Iberia were in consumer companies • Enterprise accounted for nearly two thirds of investments in Israel, and over one third of investments across most other regions 31% 39% 47% 50% 54% 55% 70% 100% 100% 61% 42% 41% 33% 31% 36% 19% 8% 17% 8% 9% 4% 5% 9% 6% 8% 7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% East. Eur. Israel UK & Ireland Nordic Benelux France Iberia DACH South. Eur. Investment in Europe and Israel by target market by country June to September 2014 (Number of investments) Consumer Enterprise SMB Telecom Government OEM @gdibner blog: yankeesabralimey 19
  20. 20. Investments by target market by stage • The majority of growth and venture rounds were in consumer-oriented companies • While nearly two-thirds of (reported) seed rounds went into consumer-oriented companies, only one third of early venture rounds were in consumer- oriented companies. This portends a disproportionate significant “Series A crunch” in consumer • Over half of early venture rounds in Europe were in enterprise- oriented companies • These findings are made more significant by the exclusion of Israel, which has long had an enterprise focus. The point here is that European venture is likely to become more diversified away from consumer 63% 39% 52% 57% 22% 51% 36% 19% 9% 14% 7% 6% 10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Seed (<2) Early Venture (2-8) Venture (8-20) Growth (20-100) Investment in Europe (excluding Israel) by target market by stage bracket June to September 2014 (Number of investments) Consumer Enterprise SMB Telecom Government OEM @gdibner blog: yankeesabralimey 20
  21. 21. Will the DACH region stay focused on the consumer? • DACH is clearly a region with a record of strong consumer- oriented investment • Drilling into the data, however, we see that while all of the venture rounds and almost all the growth rounds were in consumer-oriented companies, at the early venture stage, the picture changes • Half of early venture investments in DACH were in enterprise-oriented companies • It’s too early to tell if this will turn into a long-term trend • DACH seed-stage investors do still seem to prefer consumer- oriented startups 71% 33% 100% 86% 14% 50% 14% 17% 14% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Seed (<2) Early Venture (2-8) Venture (8-20) Growth (20-100) Investment in DACH by target market by stage bracket June to September 2014 (Number of investments) Consumer Enterprise Government OEM @gdibner blog: yankeesabralimey 21
  22. 22. Investment rounds by vertical • Financial (“fintech”) startups drove the highest number of VC rounds • Deep diversity across Europe Financial, 19 Infrastructure, 13 Electronics, 13 Marketing, 8 Data, 8 Adtech, 8 Food, 8 Security, 7 Media, 7 Lifestyle, 6 Development, 5 Communications, 5 Gaming, 5 European & Israeli venture financing by target market June to September, 2014 (number of investments) @gdibner blog: yankeesabralimey 22
  23. 23. Which verticals for which markets? • SMB-focused companies were concentrated in only two verticals: financial and marketing • Most other verticals saw investment into both consumer- and enterprise- oriented businesses Industrial Children Sports Water Education Storage Transportation Energy Durables HMI Logistics Fashion Real Estate Productivity Travel Health Employment Development Communications Gaming Lifestyle Media Security Marketing Data Food Adtech Infrastructure Electronics Financial 0 2 4 6 8 10 12 14 16 18 20 European & Israeli venture financing by target market June to September, 2014 (number of investments) Consumer Enterprise Government OEM SMB Telecom @gdibner blog: yankeesabralimey 23
  24. 24. What business models are attracting the most VC investment in Europe & Israel? • In terms of dollars invested, commerce is the clear leader, with over one- quarter of the invested capital • Software (21%) and SaaS (13%) are significant, as one would expect • Marketplace business models take third place, with 19% of invested capital Commerce, 574, 27% Software, 444, 21% Marketplace, 403, 19% SaaS, 262, 13% Services, 230, 11% Systems, 135, 7% Semiconductors, 29, 1% Components, 23, 1% Media, 5, 0% European & Israeli venture financing by target market June to September, 2014 (in US $M) @gdibner blog: yankeesabralimey 24
  25. 25. US VC interest is concentrated in specific business models • US VC firms investing in Europe & Israel focused mainly on SaaS, software, and services • Media, components, and semiconductors attracted little interest from local VCs, and no interest at all from US VCs 2 4 4 7 11 15 2 5 6 20 12 25 24 46 35 0 10 20 30 40 50 60 Semiconductors Components Media Systems Commerce Marketplace Services Software SaaS VC Investments in Europe & Israel June to September, 2014 US VC involved No US VC involved @gdibner blog: yankeesabralimey 25
  26. 26. The most popular segments in Europe • The 153 investments in Europe & Israel fell into 87 distinct segments • Of these, 70 fell into 22 segments of 3 or more companies • The top four segments, each with 6 investments, were: • Consumer food commerce • Consumer financial services • Enterprise security software • Enterprise infrastructure software 0 1 2 3 4 5 6 7 Enterprise Adtech Marketplace OEM Electronics Systems Consumer Electronics Systems Consumer Lifestyle Marketplace Enterprise Development SaaS Consumer Real Estate Marketplace Enterprise Financial SaaS Consumer Travel Commerce Consumer Media Services Enterprise Infrastructure SaaS Enterprise Financial Software Consumer Gaming Software OEM Electronics Components Enterprise Data SaaS Enterprise Marketing SaaS Enterprise Security Software Consumer Food Commerce Enterprise Infrastructure Software Consumer Financial Services Investment in Europe and Israel by segment by country June to September 2014 (segments with 3 or more investments) UK & Ireland Israel DACH Nordic France Iberia Benelux South. Eur. East. Eur. @gdibner blog: yankeesabralimey 26
  27. 27. The most popular segments in Europe & Israel for US VC firms • Across Europe & Israel, US VC firms invested in 15 enterprise companies, 12 consumer companies, and 1 government-oriented company • All four consumer commerce companies that attracted investment from US VCs were from the DACH region 0 1 2 3 4 5 6 7 8 Software Software Systems Marketplace Services Commerce Marketplace Services Software SaaS Government Consumer Enterprise US VC Investments in Europe and Israel by segment by country June to September 2014 Israel Germany UK Spain France Ireland Netherlands Norway Portugal Sweden @gdibner blog: yankeesabralimey 27
  28. 28. Average investment size by target market • Growth rounds involving US firms are significantly larger than rounds that do not • This effect is especially pronounced for enterprise companies • Companies targeting SMBs raise much larger growth rounds than companies targeting consumer or the enterprise • At the early venture and venture stages, the involvement of US firms does not imply a larger round 4 4 4 6 2 11 11 8 12 15 34 24 27 47 3 4 11 11 42 39 56 0 10 20 30 40 50 60 Consumer Enterprise OEM SMB Telecom Consumer Enterprise Government OEM Telecom Consumer Enterprise OEM SMB Early Venture (2-8) Venture (8-20) Growth (20-100) Average round size, US $M No US VC involved US VC involved @gdibner blog: yankeesabralimey 28
  29. 29. Average investment size by business model • Growth rounds involving US VC firms were larger across the board • This was especially true for systems companies • Commerce companies were the exception: commerce companies with US backers tended to raise smaller rounds 5 4 5 4 4 3 4 4 4 10 10 10 11 10 11 13 43 23 45 24 26 30 28 32 4 3 12 11 11 8 34 58 35 43 39 56 0 10 20 30 40 50 60 70 Commerce Components Marketplace Media SaaS Semiconductors Services Software Systems Commerce Components Marketplace SaaS Services Software Systems Commerce Components Marketplace SaaS Semiconductors Services Software Systems Early Venture (2-8) Venture (8-20) Growth (20-100) Average round size, US $M No US VC involved US VC involved @gdibner blog: yankeesabralimey 29
  30. 30. Focus on fintech: investment volume • $364M was invested across Europe & Israel into 24 fintech companies • The UK was far and away the leader in terms of dollars invested in fintech startups • Other regions, however, are attracting similar levels of investment in early venture and venture stages 21 4 7 4 5 10 14 25 22 156 56 40 0 20 40 60 80 100 120 140 160 180 200 UK Sweden Germany Israel Spain Total amount invested (US $M) Fintech VC investment in Europe and Israel by bracket by region, Jun-Sep 2014 Growth (20-100) Venture (8-20) Early Venture (2-8) @gdibner blog: yankeesabralimey 30
  31. 31. Focus on fintech: target markets • UK & Ireland lead in terms of the number of fintech companies raising finance • Fintech companies in the Nordics and the UK & Ireland are diversified across Enterprise, Consumer, and SMB • Fintech financing rounds in DACH and Iberia are consumer-heavy 3 5 2 1 4 1 3 1 3 1 0 2 4 6 8 10 12 UK Germany Sweden Israel Spain Denmark Number of investments Fintech VC investment in Europe and Israel by bracket by region, Jun-Sep 2014 SMB Enterprise Consumer @gdibner blog: yankeesabralimey 31
  32. 32. Focus on enterprise SaaS: investment volume • 40 enterprise SaaS companies raised $355M • The biggest investment volume was in the UK, followed by Israel • Growth investments were limited to the UK, Israel, and Norway 28 29 5 10 10 5 6 4 25 43 14 8 10 93 35 30 0 20 40 60 80 100 120 140 160 UK Israel Norway Sweden France Ireland Spain Germany Finland Denmark Total amount invested (US $M) Enterprise SaaS VC investment in Europe and Israel by bracket by country June to September 2014 Growth (20-100) Venture (8-20) Early Venture (2-8) Seed (<2) @gdibner blog: yankeesabralimey 32
  33. 33. Focus on enterprise SaaS: verticals • Enterprise Marketing SaaS was the most common segment, with nine companies raising VC money • Six companies in the Enterprise Data SaaS raised VC financing, suggesting that the big data trend is alive and well in Europe & Israel 0 2 4 6 8 10 Health Media Development Adtech Financial Employment Productivity Infrastructure Data Marketing Enterprise SaaS VC investment in Europe and Israel by vertical by country, June to September 2014 (number of investments) UK Israel France Spain Sweden Germany Finland Norway Denmark Ireland @gdibner blog: yankeesabralimey 33
  34. 34. Focus on consumer electronics systems • Despite the widely expected boom in consumer hardware startups, only $40M was invested across Europe into this space • Five companies in the space raised money in the UK, Israel, and Sweden 12.2 12.5 8.0 3.7 4.0 0 2 4 6 8 10 12 14 16 18 UK Israel Sweden Amount invested (US $M) Consumer electonics VC investment in Europe and Israel by bracket by region, Jun-Sep 2014 Early Venture Venture @gdibner blog: yankeesabralimey 34
  35. 35. About the author Partner at based in Previously helped run European seed program for Worked seven years as a VC in Investments include If you found this useful, I hope you’ll subscribe to my blog. 35

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