Sentiment of Seed Investors in Europe

SENTIMENT OF SEED INVESTORS
IN EUROPE
Q2 2018

Foreword
Great entrepreneurs dream about creating
new sectors, reshaping entire industries and
fundamentally disrupting the status quo. Seed stage
is the inaugural moment in every startup’s lifecycle,
and often impacts the trajectory of a company’s
journey. Investors who make these early bets, in
no small part, help to shape the startup’s ability to
succeed in the years to come.
In conducting this research, we specifically set out
to capture the sentiment of the Europe-based seed
investment ecosystem. It reflects a moment in time
(Q3/Q4 2017), and intends to collate insight from a
broad base of leading seed investors across the
continent - to take the temperature of the community,
and help build a picture of the seed landscape.
At Mosaic, we typically invest after seed, in a
company’s Series A round. We work alongside
the seed community every day so we hope that
taking the pulse of the seed investor ecosystem will
provide useful insights for the founder and investor
ecosystems alike.
We would like to extend our thanks to everyone who
made this report possible. First and foremost to all of
the respondents. Everyone who participated is either
a General Partner of a European seed fund, or serial
angel investor.
We are always appreciative of your thoughts and
feedback, please feel welcome to get in touch at
info@mosaicventures.com
Simon Levene
Cofounder and Partner
Introduction
2Mosaic Ventures | Sentiment of Seed Investors in Europe 2018

Their words
Introduction
We have seen the quality
and quantity of startups on
the continent continually
increase over the last
few years. This trend is
bound to continue, as
more repeat founders and
experienced startup execs
take a second or third
run at building a business
and as the surrounding
ecosystem continues to
grow in maturity.
Pawel Chudzinski
Point Nine Capital
It is refreshing to see
that the majority of seed
investors are bullish on
the state of the industry
in Europe, and are in
agreement that the quality
and the ambitions of
startups on the continent
is gradually increasing.
Pietro Bezza
Connect Ventures
The resilience of Europe’s
technology industry,
including seed and
venturing investing, has
been incredibly impressive
over the last few years.
Even against an uncertain
political backdrop on both
sides of the Atlantic, tech
hasn’t blinked.
Saul Klein
LocalGlobe
It is best to see Europe as
one, large collaborative
ecosystem, rather than
a collection of nations in
perpetual competition.
With this in mind, it is
fantastic to see seed firms
increase their presence
across the continent,
while maintaining a robust
presence in the traditional
centres of gravity.
Alice Bentinck
Entrepreneur First

Introduction
European Seed
Investing:
an overview
We estimate that seed activity in Europe grew >2x in
2013-17, to approximately 30-40% of US seed deal
volume. In the same period, median size of seed
financings has increased to $1m, (30% smaller than
the US median).
We count 44 funds have made 6+ seed investments
each year between 2015-2017, and >75 firms made
4 or more in that window. Note that this statistic does
not include accelerators.
The graphic on the right visualises a selection of new
seed-focused funds raised since 2012, across the
continent.
Infographic:
New Seed Firm Formation
Source: Pitchbook; Mosaic Ventures Analysis
Mosaic Ventures | Sentiment of Seed Investors in Europe 2018

43%
GBR
11%
FRA
11%
GER
7%
SWE
8%
FIN
3%
SPN
3%
PLN
2%
NOR
2%
NED
2%
BEL
2%
AUS
2%
CZE
Approach & Methodology
This is a survey of Europe’s
leading seed investors
In the fall of 2017, Mosaic brought together
Europe’s leading seed funds and prevalent
angel investors at our first “Seed Summit”.
We took this opportunity to ask the group about the
investing landscape, the state of European startups
and the broader technology industry.
Over the following weeks, sixty investors completed
the questionnaire, all of whom focus on seed.
43% are based in the UK, 22% in France or Germany.
44% represent seed firms more than three years old;
25% from a seed firm less than three years old;
15% are independent angels and 12% are from
multi-stage venture capital firms active at seed.
Infographic:
Q. What country are you based in?
Source: Mosaic Ventures

These are the key findings
1. The quality of seed startups has
improved.
2. AI is the hottest investment sector.
3. Over 30% of investors have increased
focus on France and the UK.
4. Brexit has had relatively little impact on
plans to invest in the UK or elsewhere
so far.
5. Investment in B2B is up, whilst B2C is
down.
6. Investments in repeat entrepreneurs
have become more common.
7. Investments in female entrepreneurs
have also become more common,
with over 30% of investors making
more investments in female CEOs or
cofounders.
8. Over 30% of investors say it is
becoming easier to raise funds from
both existing and new LPs, with 50%
saying the overall climate has remained
unchanged.
Introduction

Full Results
SECTION 1
What seed investors think about startups
What seed investors think about Brexit
What seed investors think about their own funds

The quality of startups
has improved
60% of investors say the quality of startups
has improved in the last 12 months.
One third say it is unchanged and only a
small minority say it has deteriorated.
Much better Somewhat better About the same Somewhat worse
13% 47%
6%
34%
Q. As an investor, how would you rate quality of companies:
better, worse or the same?
(last 12 months vs. 24 months before that)Survey compiled by Julian Missel of Vivi Research and
Mosaic Ventures

The pathway 
from seed to Series A 
has improved
Follow-on funding appears to be robust.
Half of investors say their portfolio’s ability
to raise series A or seed extension has
improved in the last 12 months.
Fewer than one in ten say that it
has got harder.
Q. How, if at all, has the ability of your portfolio
to raise Series A (or a seed extension) changed?
(last 12 months)
52%
9%
39%
Somewhat better About the same Somewhat worse

An increase in seed
investments made in
repeat entrepreneurs
While a third of investors say that they
have made more investments in repeat
entrepreneurs over the last year, two thirds
say that there has been no change.
Q. How, if at all, have your investments
in repeat entrepreneurs changed?
(last 12 months vs. 12 months before that)
33%
67%
More investments No difference Fewer investments

An improving picture for
female entrepreneurs
There is still much improvement needed,
however 32% of all investors say that
they have made more investments in
female CEOs or cofounders over the last
12 months compared to the previous
year. Only a small minority say that such
investments have declined.
Q. How, if at all, have your investments
in female CEOs or cofounders changed?
32%
64%
4%

What’s hot? AI is the
hottest seed investment
sector
Seven in ten investors are excited about
the AI sector, while over three fifths are
enthusiastic about SaaS and Marketplaces.
Over half regard Digital Health and Fintech
as exciting. However, investors are largely
indifferent to E-commerce and IoT.
Q. As an investor, what sectors are you
currently most excited about?
70% AI-based applications
64% SaaS
61% Marketplaces
54% Digital Health
52% Fintech
33% Cybersecurity
30% Software infrastructure
30% Consumer services
26% Crypto
23% VR / AR
23% Analytics
15% IoT
13% E-commerce
6% Other

What’s not? E-commerce
the sector that investors
are most likely to shun
Over three fifths of investors are
disinterested in E-commerce or actively
avoid it.
A sizeable minority say the same of
VR / AR and IoT, while virtually no investors
would shun AI or SaaS opportunities.
Crypto divides opinion, with 24% avoiding
the sector and 26% excited about it.
Q. What sectors do you actively avoid
or have no interest in as an investor?
61% E-commerce
30% VR/AR
24% IoT
24% Crypto
17% Cybersecurity
15% Consumer services
13% Digital health
11% Other
11% Software infrastructure
11% Analytics
11% Fintech
9% Marketplaces
4% SaaS
2% AI-based applications

A rise in
B2B investments, a fall in
B2C investments
Half of investors say they have invested
more in B2B in the last 12 months
compared to the previous year. Fewer than
one in seven say the same of B2C.
Half claim that they have invested less in
B2C companies in this period.
Q. Compared to the previous year, have you invested more or less
in...? (a) B2B businesses (b) B2C businesses?
(last 12 months)
MORE INVESTMENT B2B
41% 10%49%
49%15% 36%
LESS INVESTMENT B2C

UK investment incentives
(SEIS / EIS) do not affect
the decision-making
process of seed investors
Three quarters of investors say that if
a UK company has raised EIS and SEIS
investment it has no impact on their
decision making, while a small proportion
say it will increase or decrease their
likelihood of investment.
Q. If a UK company has raised EIS and SEIS investment,
what impact does this have on your decision making?
14%
Increases likelihood of investment No difference Decreases likelihood of investment
11%
for 75%, SEIS / EIS has
no impact on investment decision

Full Results
SECTION 2

A quarter of investors
are less likely to invest in
UK companies following
Brexit
For the majority of investors, Brexit has
little impact on plans to invest in the UK or
elsewhere. However, around a quarter say
that it has made them less likely to invest
in UK companies.
Q. How, if at all, has Brexit impacted on your likelihood to invest in
UK Companies?
due to Brexit,
23% of investors are
less likely to invest in UK
75%
2%

One in seven investors
more likely to invest
in non-UK companies
following Brexit
14% of investors say that Brexit made them
more likely to invest in non-UK businesses,
with 5% saying they are less likely to invest
in non-UK companies as a result.
Q. How, if at all, has Brexit impacted on your likelihood to invest in
non-UK Companies?
5%
82%
due to Brexit, 14% of
investors are more likely to
invest in non-UK companies

Brexit is making portfolio
recruitment harder, for
41% of respondents
Compared with the European average, a
greater proportion of UK-based investors
reported Brexit had negatively impacted
the ability of their portfolio companies to
recruit.
Q. How, if at all, has Brexit impacted
your UK portfolio’s ability to recruit?
41%
59%
Increases ability to recruit No difference Decreases ability to recruit

Full Results
SECTION 3

A third of seed investors
believe it’s getting easier
to raise funds
Around a third say it is getting easier to
raise funds from both existing and new
LPs.
Further, only around one in six investors
say that it has become more challenging to
raise funds from existing LPs, while around
a quarter say this of new LPs.
Q. Has it become more or less challenging to raise funds from
(a) Existing LPs (b) New LPs?
16%
50%
34%
23%
45%
(b) ease of raising funds from
new LPs
(a) ease of raising funds from
existing LPs
Easier raising funds No difference Harder raising funds
32%

32% France
UK
Nordics
DACH
31%
15%
14%
12%
5%
3%
24%
Spain
Israel
CEE
None of the above
Seed investors are
putting more resources
in the UK and France
Around a third of investors have increased
resources in France and the UK compared
with the previous year. Around one in
seven say they have increased resources in
Nordics and DACH.
Q. In which geographies, if any, have you increased resources?
What seed investors think about their own fundraising

A few final words

On the data
Investors were invited to participate in this
research study.
Responses were collected through interviews held
over the period Q3–Q4 2017.
The questionnaire was developed by Mosaic
Ventures in conjunction with independent research
agency Vivi Research. Vivi also managed data
collection and analysis. All data are unweighted.
A few final words

Grafton House, 2-3 Golden Square, London, W1F 9HR
info@mosaicventures.com

Sentiment of Seed Investors in Europe

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