CAN EUROPE BE THE MOST ENTREPRENEURIAL CONTINENT? 29 October 2020 Journey so far: Europe ditching its old image Present: Entrepreneurship, jobs, skills, innovation Future: What’s needed most in the next five years 1 2 3 Journey so far: Ditching an old image Personal computing The web Mobile computing Cloud computing AI 1970s 1980s 1990s 2000s 2010s 2020s Apple $2.1T Microsoft $1.7T Amazon $1.7T Google $1.1T Facebook $0.8T Alibaba $0.8T Tencent $0.7T Dotcom Crash Banking crisis NASDAQ $10 trillion Covid-19 Page / 4 Why do we need entrepreneurialism? Source: Dealroom.co and Google Finance data as of October 14, 2020 EuropeanStartups.co K-shaped recovery EuropeanStartups.co - slide inspired by Klaus Hommels Page / 5 $1.2 trillion VC invested since 1995 $10 trillion value of VC-backed companies Almost 50% of R&D spending >10% of jobs A huge part of the US economy is now venture-backed. EuropeanStartups.co - slide inspired by Klaus Hommels Page / 6 $200 billion 6x less $700 billion 14x less Not meaningful <1% of jobs $1.2 trillion VC invested since 1995 $10 trillion value of VC-backed companies Almost 50% of R&D spending >10% of jobs How does Europe compare? » Europe » Asia 5% Global venture capital invested » United States Amazon ($1.2T) 16% Facebook ($650B) Netflix ($180B) Salesforce ($160B) Tesla ($160B) 4% Since 2005, European venture capital started to ramp up. Google ($1.0T) Page / 7 EuropeanStartups.co 2020E 15% € 230B 10% 13% 12% Source: Dealroom.co. Note: 2020 is annualized based on Jan - Oct. European VC ramps up Europe has created 205 unicorns, mostly venture backed. Page / 8 20% VC backed €136M average funding (1) 87% VC backed ~€355M average funding (1) EuropeanStartups.co Cumulative number of European unicorns created by year $1 billion valuation was reached Source: Dealroom.co. 1. Mean funding when reaching unicorn status. EuropeanStartups.co 2.5x Page / 9 $419B $170B Top 5 most valuable VC-backed companies since 2005. Source: Dealroom.co and Google Finance data as of October 14, 2020 EuropeanStartups.co Source: Dealroom.co Note: the labels “Seed”, “Series A” are standardised labels per Dealroom.co method, not the reported labels as they are not consistently applied. Page / 10 Remarkably, 38% of all global seed stage capital is raised by European startups. North America Europe Asia Row % investment in 2019-2020 per round size and per region Amazon, Google, Facebook, Microsoft etc. Unchallenged in Europe 38% of all seed capital is invested in Europe Adyen vs. Stripe Spotify vs. Netflix Just Eat Takeaway vs. Uber Eats Page / 11 Page / 11 Three generations of European startups Up to 2005 2005-2015 Today EuropeanStartups.co Present: Entrepreneurship, jobs, skills, innovation EuropeanStartups.co Page / 13 Snowball effect in is in full force in Europe. Criteo Alando Spotify Skype Auto1 Daniel Ek LoveFilm Cazoo LocalGlobe Zoopla Seedcamp Passion Capital Daphni Cherry Ventures Starship Technologies Atomico Transferwise Zalando Bibit Adyen GoCardless Nested Monzo Starling Duffel Framer Northvolt Source: Dealroom.co Source: Dealroom.co 2016 2025 2020 10% annual growth 1.5M jobs 2M jobs ~ 3.2M Page / 14 Does everyone now work at a startup? EuropeanStartups.co Startups have become a significant contributor of new jobs …. EuropeanStartups.co … and are by far the fastest and most resilient growing job engine Source: based on Dealroom.co analysis of data for Netherlands and Germany. Page / 15 USA spends more on IT 4.0% 3.7% 2.2% 2.1% 1.1% 0.8% 0.7% US UK Germany Japan South Korea India China $830B $105B $89B $104B $18B $22B $88B $20T $2.8T $4T $5.0T 1,620 2,667 13,424 IT spending ($B) GDP ($B) Spending on IT as % of GDP (2018) 2.2% France $61B $2.7T Source: Bain analysis of Gartner, IDC, Economist and other data. Page / 16 EuropeanStartups.co European Industrial EuropeanStartups.co Corporate R&D spending is dominated by Big Tech. Page / 17 Source: PwC, The 2018 Global Innovation 1000 study. Amazon Alphabet Intel Microsoft Apple Oracle Cisco IBM Qualcomm Broadcom Western Digital Medtronic Abbott Laboratories Micron Technology NVIDIA VMWare Salesforce Snap Volkswagen Roche Novartis Daimler Sanofi GSK BMW Johnson & Johnson Merck Ford Pfizer General Motors Eli Lilly and Company Bristol-Myers Squibb General Electric Siemens Nokia Ericsson SAP Philips HP U.S. Tech U.S. Industrial European Tech $199B $98B $40B $40B Brain drain: AI professors leaving universities for Big Tech. Figure note: Graphs include AI professors who completely left academia or reported a dual industry and academic affiliation Carnegie Mellon, University of Washington, Berkeley, Georgia, Toronto, Stanford, Michigan, Harvard, Purdue Google, DeepMind, Amazon, Microsoft, Uber, NVIDIA, Facebook, IBM, Apple, Intel, Netflix, + 85 - 97 Source: State of AI report. Page / 18 EuropeanStartups.co Future: What’s needed most in the next five years Helping the current generation of startups. Page / 20 2,800 Series A+ startups 50K Pre-seed & Seed startups 300 potential future unicorns 80 unrealised unicorns Realised exits 20-30% graduation rate Shortage of European growth capital Source: Dealroom.co. EuropeanStartups.co Page / 21 European VCs have been raising record amounts of new funds. Seed Series A+ Growth stage €190M Feb 2020 $2B Apr 2020 €463M Jun 2018 $200M Sep 2019 $820M Feb 2020 $477M Mar 2019 €175M Jun 2019 $735M Feb 2020 $375M Mar 2018 $115M Jun 2019 $500M Nov 2019 €193M Nov 2019 €100M Sep 2020 $400M Nov 2019 Latitude: $180M Dec 2018 Source: Dealroom.co. 2015 2016 2017 2018 2019 2020 YTD €6.6B €8.2B €9.4B €12.1B €12.7B €12.8B EuropeanStartups.co EuropeanStartups.co Page / 22 USA & Asian VCs Growth & private equity Sovereign Wealth Funds Corporates Family Offices / Private Wealth Crowdfunding Additional investor groups Note: New funds raised are invested over different years and also some capital raised by European VC is also invested abroad. But European startups need at least 3x more capital than that, already today. 2015 2016 2017 2018 2019 2020 YTD €16B €17B €24B €28B €38B €29B █ New European VC funds █ Capital raised by European startups €8.2B €9.4B €12B €13B €13B €6.6B EuropeanStartups.co Much bigger tech companies will be built in the coming years, needing more funding $300 Entertainment LG5 Transport $3,000 Early Years Education $6,00 0 Primary $3k $7k 2ndary FE $8k $7k Higher $36k Health $4,500 Food $2,200 Energy $900 $1,000 Apparel Family Rental Housing $36,000 Discretionary Internet Non-Discretionary Internet Social Impact & Value Creation (Annual $ per capita) Private Assets Finance $88,000 Page / 23 Source: LocalGlobe presentation. UK France Germany Sweden Netherlands EU Israel USA Fund of Funds BPC/BBB £2.5B Bpifrance €6.5B KfW Capital €0.5B Saminvest $0.5B RVO (Seed Capital) €0.3B EIF €12B No No Grants Innovate UK Bpifrance €1.3B BMWi EXIST €78M (2019) ZIM €0.6B (2019) Vinnova $0.3B (yearly) No Horizon Europe €100B Israel Innovation Authority (IIA) $0.5B (2019) Small Business Administration $2.5B (yearly) Equity co-investing No Bpifrance €1.6B HTGF €325M Coparion €225M Almi $0.2B InvestNL €1.7B EIC Accelerator €3.0B No SBIC (part of SBA) $5.5B yearly Debt co-investing No Bpifrance €1.3B KfW Group ERP Start-up Loans Almi $0.3B No EIB €2.1B SBA $0.7B SBIC $5.5B yearly R&D tax credits Yes £4.5B (2018) CIR €6.2B (2019) No Yes €0.2B (2018) WBSO €1.3B (2020) Yes Yes Yes $9.7B (2018) Investor tax relief £2bn (EIS/SEIS 2019) No No Yes No No No No EuropeanStartups.co Europe already has institutions and programs to provide support. Note: preliminary Dealroom analysis. Page / 24 EuropeanStartups.co Page / 25 Yeah, Deep tech is cool. But you know what’s really cool? Source: Dealroom.co 1. Sum of the valuations of all startups in the ecosystem founded after 2000. European Deep Tech: $150B (1) EuropeanStartups.co Yeah, Deep tech is cool. But you know what’s really cool? Page / 26 European Deep Tech: $150B (1) Tiktok: $150B Source: Dealroom.co 1. Sum of the valuations of all startups in the ecosystem founded after 2000. EuropeanStartups.co Inspired by Benedict Evans’ Jan 2020 presentation Standing on the Shoulders of Giants (data from companies and Zenith). Source for B2B: “In-depth: B2B e-Commerce 2019” by ecommercedb.com Page / 27 Market share in core domains What do companies that dominate their market have in common? Search Social Online advertising B2B eCommerce Video streaming Mobile operating systems Cloud hosting Online payments Payment cards Google Facebook Facebook + Google Alibaba Rakuten Youtube + Netflix Android + iOS AWS + Google + Microsoft Paypal, Stripe 90% 70% 70% 80% 80% 60% 60% Visa, Mastercard Unionpay 80% EuropeanStartups.co Page / 28 What should we really be building? Deep Tech Things that people love to use EuropeanStartups.co Page / 29 What should we really be building? Deep Tech Things that people love to use Solving our biggest challenges EuropeanStartups.co No Government picking winners Deep tech without commerce Penalize exits or employee ownership Page / 30 Yes Attract & incentivise talent Late stage capital (fund-of-funds) Appendix: additional data EuropeanStartups.co European venture capital seems unfazed by the pandemic. Page / 32 Q3 2020 Q3 2019 Q3 2018 Q3 2017 Q3 2016 €10.2B €11.2B €4.9B European venture capital investment Source: Dealroom.co Page / 33 Source: Dealroom.co Share of global venture capital is stable at around 15%. €17B €24B €28B 2016 2017 2018 2019 2020E €38B ~€35B €29B YTD European venture capital is getting to serious scale. 12% 13% 10% 16% 2016 2017 2018 2019 2020E 15% 88% 87% 90% 84% 85% RoW Europe EuropeanStartups.co Top 10 companies: €215 billion €123 billion €30 billion €618 billion €155 billion Combined value(1) of the ecosystem 2015 Jan 2020 Oct 2020 █ Rest of ecosystem █ 10 Most valuable tech companies €422 billion EuropeanStartups.co Page / 34 Source: Dealroom.co 1. Sum of the valuations of all startups in the ecosystem founded after 2000. Using estimated valuations based on most recent VC rounds, public markets and publicly disclosed valuations as of October 22, 2020. 2. A future unicorn is defined as tech driven company valued over $200 million but less than $1 billion, excluding acquired and/or public companies. European tech ecosystem has ballooned to €618 billion in combined value. Rest of Unicorns: €222 billion Future Unicorns (2) : €103 billion Rest of ecosystem Page / 35 % of total VC investment into Europe, total VC Source: Dealroom.co estimates. % of total VC investment into Europe, for rounds larger than €100M 2016 2017 2018 2019 2020E 72% 65% 64% 60% 62% 53% 45% 39% 38% 40% 2016 2017 2018 2019 2020E 28% 35% 36% 40% 38% Europe RoW 61% 62% 60% 47% 55% Europe RoW Foreign investors are still key to European startups. EuropeanStartups.co EuropeanStartups.co Source: Dealroom.co estimates. Note: the labels “Seed”, “Series A” are standardised labels per Dealroom.co method, not the reported labels as they are not consistently applied. Page / 36 European venture capital investors are less involved in larger rounds. % of European investment in 2019-2020 by source and size Domestic Cross-border Rest of World Asia USA and Canada Page / 37 Venture capital investment activity: 2020 vs. 2019 Monthly venture capital investment amount - cumulative Monthly number of venture capital rounds above €2M - cumulative Source: Dealroom.co. 2019 Jan-Oct 2020 Jan-Oct % change Estonia €0.1B €0.2B Ireland €0.5B €0.6B Belgium €0.6B €0.8B Austria €0.2B €0.2B Finland €0.8B €0.9B Norway €0.3B €0.3B Netherlands €1.2B €1.3B United States €98.1B €100.6B France €4.3B €4.4B Japan €1.1B €1.1B Sweden €2.6B €2.5B Israel €3.7B €3.5B China €29.7B €27.5B India €9.4B €8.5B United Kingdom €11.4B €10.1B Germany €5.9B €4.3B Switzerland €1.8B €1.3B Denmark €0.5B €0.3B Spain €1.1B €0.5B Romania €0.7B €0.2B Cumulative venture capital investment amount from January to October Page / 38 VC investment in Europe per country. Source: Dealroom.co 109% 36% 25% 13% 11% 7% 6% 3% -3% -3% -6% -7% -10% -11% -27% -27% -34% -51% -69% 2% Cumulative venture capital investment amount from January to October, rounds below €100M 2019 Jan-Oct 2020 Jan-Oct % change Finland €0.3B €0.7B Switzerland €1.0B €1.3B Netherlands €0.9B €1.0B Ireland €0.5B €0.5B Austria €0.2B €0.2B Germany €2.9B €3.1B United States €52.2B €51.1B Israel €3.1B €3.0B United Kingdom €7.2B €6.6B Belgium €0.6B €0.5B Japan €1.1B €0.9B France €3.5B €3.0B India €5.2B €4.3B Estonia €0.1B €0.1B China €11.3B €8.3B Italy €0.5B €0.3B Sweden €1.1B €0.7B Denmark €0.5B €0.3B Spain €0.8B €0.5B Norway €0.3B €0.1B Page / 39 VC investment in Europe per country (excl. mega-rounds). Source: Dealroom.co 131% -9% 37% 17% 15% 13% 5% -11% -14% -15% -16% -18% -27% -31% -33% -34% -36% -59% -2% -3% Country Covid-19 response Amount per startup with >€1M funding France Bpifrance €5.2B Guarantees, accelerated tax credits, direct loans €3.0M per 1,700+ startups Germany BMWi / KfW / regional banks €2B Fund-of-funds, direct loans €2.0M per 1,000+ startups UK BBB, Innovate UK, EIS £1.25B Co-investing and direct loans €0.5M per 2,700+ startups Sweden Saminvest, Almo, Vinnova SEK3B Direct investing, guarantees, tax credits €0.5M per 600+ startups Netherlands RVO, BOM, InvestNL €100M Direct loans €0.2M per 450+ startups EU EIF, EIB, EIC, Horizon Europe €300M Fund-of-funds triggering investments of up to €1.2B €40K per 8,000+ startups Israel Israel Innovation Authority $180M Direct loans €0.2M per 900+ startups USA Small Business Admin -- -- EuropeanStartups.co Note: preliminary Dealroom analysis. Page / 40 France has responded most decisively. Venture capital funding per capita in 2019 Page / 41 2019 average EU per capita funding still lags the US and Israel. But individual countries like the UK, Sweden and Finland have closed in significantly. Source: Dealroom.co. World Bank for population. Venture capital funding per capita in 2014-2019 EuropeanStartups.co EuropeanStartups.co Source: Dealroom.co. Page / 42 80% 60% 40% 20% 0% 0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100% Decile The top 10% companies represent 80% of value but less than 50% of jobs. Contribution by decile ▉ Company valuation ▉ Jobs 80% 60% 40% 20% 0% Nearly all value is concentrated here Most jobs are here EuropeanStartups.co Lending/Investing Income from assets Reschooling Remote working Gig & passion economy Jobs marketplaces Source: Dealroom analysis of Eurostat (EU28) data. It’s not just about spending money online. The digital consumer is managing work, banking and (re)schooling also online. Housing Food Health Mobility Education Travel Fashion Communication Services Recreation $17 trillion expenses & savings $17 trillion income (work and other) Wages Freelance work Social benefits Income from assets Net savings $12 trillion expenses ◀ Banking & financing ▶ €35tn in assets €7tn debt (77% mortgages) European households Page / 43 EuropeanStartups.co Corporate R&D spending is dominated by Big Tech. Amazon Alphabet Volkswagen Samsung Intel Corporation Microsoft R&D spend 2018 █ Europe (incl. UK) █ Non-Europe Page / 44 $23 billion $16 billion Apple Roche Johnson & Johnson Merck & Co Toyota Novartis Ford Facebook Pfizer General Motors Daimler Honda Sanofi Siemens Oracle Cisco GSK Celgene BMW Nokia Exor IBM QUALCOMM AstraZeneca $15 billion $13 billion $12 billion $11 billion $10 billion $9 billion $8 billion $7 billion $6 billion $5 billion Source: PwC, The 2018 Global Innovation 1000 study.