Dec 5, 2018 | Techcelerate Ventures |
Seed the Future: A Deep Dive into European Early-Stage Tech Startup Activity Early Stage Startups in Europe NOVEMBER 2018 Early Stage Startups in Europe 2 BROUGHT TO YOU BY Stripe is a technology company that builds economic infrastructure for the internet. Businesses of every size from high-growth technology companies like Deliveroo, ManoMano, Catawiki, Uber, Booking.com and Salesforce use our software to accept online payments and run technically sophisticated financial operations in more than 120 countries. Headquartered in San Francisco, with global offices in North America, Europe, Australia, and Asia, Stripe helps new companies get started and grow their revenues. For more information on how Stripe works with startups and can partner with VC's or accelerators, please get in touch at email@example.com Early Stage Startups in Europe 3 BROUGHT TO YOU BY Techstars is the Worldwide Network that helps entrepreneurs succeed. Through the Techstars Worldwide Entrepreneur Network, founders connect with other entrepreneurs, experts, mentors, alumni, investors, community leaders, and corporations to grow their companies. Techstars currently runs programs in London, Berlin, Paris, Lisbon, Oslo, Amsterdam and Munich. London was the first Techstars program outside of the United States, when it opened its doors in 2013. Led by Eamonn Carey (Managing Director) and Marko Srsan (Program Director), Techstars London now has 70+ companies in their sector and stage-agnostic portfolio that consists of everything from machine learning to graph databases, juice to restaurant analytics and language learning to fish supply chain. More than 45 of those companies went on to raise more than $175M in capital from investors like Connect Ventures, Downing Ventures, Episode 1, Felix Capital, Tekton Ventures, Index Ventures, Kindred Capital, Force Over Mass Capital, Backed VC, Point Nine Capital, Pentech Ventures, Partech Ventures, Rakuten and others. If you wish to find out more about and get in touch with those companies, please reach out to Marko directly. If you are building a company or know someone who would benefit from going through the Techstars London program in 2019, please connect with Eamonn. Early Stage Startups in Europe 4 Since we started, one of the key aims of Tech.eu has been to track all of the funding rounds and exits in Europe, to provide the most comprehensive and accurate record and analysis of the European technology scene. We do this by meticulously monitoring hundreds of sources, across multiple languages and regions. This report, developed in partnership with Stripe and Techstars, focuses on the conditions and outcomes for early stage companies in Europe from 2015 to Q2 2018. In many ways, conditions for the development of early stage technology companies in Europe have never been better. Across the continent we find larger early stage investments, greater attention from international investors, as well as companies successfully bootstrapping themselves, earning revenue and becoming viable businesses. Companies are also raising funding through additional means such as micro-investment, crowdfunding and emerging sources such as ICOs and tokens. Government support and public policy have sought to fill in the gaps to cultivate more fertile conditions for new companies, and community activities dedicated to entrepreneurship have flourished across the continent. As conditions for early stage technology companies become more supportive than ever before, they also are at their most competitive. While greater competition between companies has the chance to build better products and offer more choice for consumers, more founders will feel the sting of failure. Early stage companies in Europe must further navigate changing regulatory conditions, and the continued absence of a digital single market, conditions that hit the smallest and newest companies hardest of all. On the horizon, Brexit threatens to sever Europe's strongest technology hub from the interconnected European ecosystem of technical talent, investment and expertise. No one said building a startup was easy. Despite the challenges, startups continue to flourish. In this report, we take an in- depth look at the current state of play for European startups from a variety of angles. We examine an overview of the main deals that have taken place in the region and the companies and investors involved. We additionally highlight the geographies of deals involved, the types of companies represented, key technology trends and how the ecosystem supports startup activity beyond investment. To illustrate these BROUGHT TO YOU BY Early Stage Startups in Europe 5 points, the report shares a number of voices and success stories from those that make this ecosystem so vibrant. We wish to thank the founders, investors and community builders who so graciously shared their views and commentary for this report. The entrepreneurial ecosystem in Europe is incredibly diverse. In an effort to make this report as comprehensive as possible, this report brings together Tech.eu's own data and interviews, as well as data made available from other sources, including that of our partners Techstars and Stripe. This multi-method approach aims to ensure that this report is able to provide a multifaceted view into a continually changing ecosystem. This report covers funding and activity for early stage companies from 2015 to the first six months of 2018. An early stage company in Medical technologies is defined very differently than one working in SaaS. As there are multiple ways to classify what exactly is an "early stage company", this report utilizes several approaches, generally focusing on companies that are in their beginning stages and have raised less than 5 million. This is consistent with our finding that a growing number of angel rounds, seed rounds and Series A funding exceed this figure, which we examine closer in our technology trends section. Due to our reliance on multiple sources, when presenting data we clearly outline the specific source used and our scope of definition. We have worked to make this report as comprehensive and useful as possible. Please refer to the section at the end of the report for further information on this report's methodology and disclaimers. For any questions or comments regarding this report, we invite you to email us at firstname.lastname@example.org This report was written by Natalie Novick, Research Lead at Tech.eu Early Stage Startups in Europe 6 Contents Introduction: Key trends for Early Stage Ventures in Europe A Deep Dive into Early Stage Startup investment trends Funding trends for Early Stage companies in Europe How funding translates into different geographies Investment in early stage companies by industry Beyond VC: How companies fund their ventures (from traditional models to microinvestment, crowdfunding, bootstrapping and emerging sources such as ICOs/ tokens) Early Stage European Technology Trends AI Machine Learning Blockchain Success Stories: What is the experience of Early stage companies in Europe? Strengths of Europe Challenges for Early Stage Founders Advice for others Acceleration Programs ObjectBox FindMeCure Crowdfunding Plum Dr. Focused Initial Coin Offerings ARYZE MADANA Early Stage Startups in Europe 7 Bootstrapping to Investment Causaly GoodHood.eu Lookiero Piwik Pro Parclick Beautystack Situm Bootstrapping to Revenue Wivaldy Hole19 Valuer Strengths of Europe More Investment is available European founders are transnational Case Study 42Maru (Korea London) Challenges for Early Stage Founders Funding should be higher Small markets and multiple languages Advice for others Key Assets of Europe's early stage entrepreneurial ecosystem: The role of the ecosystem in supporting early stage startup activity Technical talent Ecosystem events and meetups Business angels and early stage VCs as ecosystem builders Public policy & government activities (Early stage company support, Startup visas, Brexit) Conclusion Methodology Data Collection Procedure Early Stage Startups in Europe 8 Key Takeaways from the Early Stage Startup Journey in Europe (Q1 2015 to Q2 2018) Early stage investment in Europe continues to grow on average quarter to quarter. In Q1 2015, early stage in investment topped out at just over 400 million (EUR), but by Q2 2018, this total expanded to over 2 billion (EUR) for the quarter. The number of deals per quarter has increased across the last three years. In Q1 2015 the number of early stage deals tracked numbered 375 across the continent. By Q2 2018, the number of early stage deals reached 630 across the continent. Following this, deals per year have grown over the past three years. This year, 1,234 early stage deals have been tracked, which are slightly below expectations from last year. This could mean that the number of investments are stabilizing somewhat, however it remains yet to be seen what the final outcome for 2018 will be. When examining funding deals by country, we notice that following other measures, the UK continues to receive the greatest amount of early stage funding in Europe. However, this amount only slightly outpaces that of France, which we find to attract 24.04% of all early stage funding Europe-wide, compared to the UK funding 24.59%. This result might be surprising to those who are familiar with the greater technology investment trends in Europe. Why are the UK and France nearly neck and neck for funding early stage ventures when so many other reports highlight how much more vibrant overall the UK's investment landscape is? Here is the unique finding -- when you examine total financing (from early to late stage financing), the UK outstrips France by a large margin. The difference here is largely made up in growth and late stage investments operating in Europe's largest market. But when we isolate our findings to only early stage funding, France and the UK attract nearly the same amount of investment in early stage deals. But what is most interesting here is the amount of investments made. France's 24% share of all total investments across the time period reflect 1,340 investments, compared to the UK's 1,147. While deal sizes in France are smaller than they are in the UK, France attracted more early stage deals overall. This could point to important identifiers about changing attitudes to entrepreneurship in France, following the country's considerable investment in becoming a "startup nation." Similarly, it speaks to the growing development of early stage VC, seed and initial investment firms in the country. While the size of these starting deals remain lower than in the UK and Germany, each of these investments represents a strong commitment in the country's growing startup ecosystem. 1 2 3 4 5 Early Stage Startups in Europe 9 Germany, while only attracting just over 12% of the deal flow across the time period, attracted the largest average investments per early stage rounds. Germany also attracted the largest investment median, meaning that while occurred less frequently, investment rounds in Germany tended to be larger elsewhere. Fintech and Medtech challenge one another for the greatest share of early stage investment. The difference in total investment is quite close, with Fintech taking 2,318,201,403 (M in Euro) to Medtech's 2,070,546,749 (M in Euro). TOP 10 E ARNING VERTIC ALS (MINUS MEDTECH AND FINTECH , ROUNDED TO THOUSANDS). 6 7 Analytics Content Developer tools Gaming Marketing Mobility SaaS Traveltech 738,306,000 586,500,000 469,020,000 534,673,000 506,668,000 667,626,000 800,716,000 520,310,000 469,019,293 Amount (EUR) 28 MEDTECH FINTECH SAAS CONTENT MARKETING TRAVEL TECH GAMING DEVELOPER TOOLS ANALYTICS MOBILITY Early Stage Startups in Europe 10 Companies have more funding models than ever before to build their ventures. While data remains poor on how accurate these new funding models are, we find ample success stories for founders that have sought to raise funding through them. Later in the report we hear the story or several founders that have sought to support their ventures through equity crowdfunding, ICOs/tokens, or through more sustainable revenue models than VC investment. These developments in early stage funding landscape simultaneously coincide with greater offerings by European VCs and investors. Today, there is greater investment than at any other time in history. While funding has improved for founders all across Europe, European founders express dissatisfaction with the amount of funding available. Early stage companies are more transnational than ever. It has never been easier for companies to extend their geographical reach and benefit from amenities elsewhere around the continent. At the same time, more and more international founders and tech talents are coming to Europe. Despite the more diverse and open landscape for founders, entrenched cultural barriers, language issues, and the continuing lack of a single market continues to frustrate European entrepreneurs that wish to scale their ventures regionally within Europe. Europe has rich resources in both technical talent and the support for them through ecosystem activities. When government policies create friction for founders, founders are able to take advantage of political solutions and support that allows them to startup where they will be most successful. The Brexit vote casts a long shadow on European tech. While the outcome is ultimately unclear, many founders remain optimistic that things will work out. 8 9 10 11 12 Early Stage Startups in Europe 11 Early Stage Venture Funding in Europe, investment by quarter, 2015-2018 Q1 2015 Q4 2016 Q2 2015 Q1 2017 Q3 2015 Q2 2017 Q4 2015 Q3 2017 Q1 2016 Q4 2017 Q2 2016 Q1 2018 Q3 2016 Q2 2018 429.38M 956.21M 445.72M 960.45M 586.89M 1,556.48M 572.51M 1,497.73M 710.65M 1,428.39M 746.47M 1,546.22M 783.91M 2,036.58M Sum of Amount (EUR) for each Quarter. Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 1400M 1600M 1800M 2000M 1200M 1000M 800M 600M 400M 200M 0M A Deep Dive into Early Stage Startup investment trends QUARTER Early Stage Startups in Europe 12 Early Stage Venture Funding in Europe, number of deals, 2015-2018 (Q2) Q1 2015 Q4 2016 Q2 2015 Q1 2017 Q3 2015 Q2 2017 Q4 2015 Q3 2017 Q1 2016 Q4 2017 Q2 2016 Q1 2018 Q3 2016 Q2 2018 375 570 331 575 395 638 442 681 553 639 532 604 534 630 Early Stage Venture Funding in Europe, number of deals per year, 2015-2018 (Q2) Sum of Number of Records broken down by Quarter. Sum of Number of Records for each Quarter (copy) Year. Note: 2018 includes Q1 and Q2 only. 2015 2016 2017 2018 1,543 2,189 2,533 1,234 1400 2000 1600 2200 1800 2400 2600 1200 1000 800 600 400 200 0M Q1 15 375 331 395 442 553 532 534 570 575 638 681 639 604 630 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 500 550 600 650 700 450 400 350 300 250 200 150 100 50 0 QUARTER Early Stage Startups in Europe 13 Geography of funding of early stage companies This bubble graph depicts both investment size and quantity. The above five circles include the top five countries earning early stage investment from 2015-2018. By looking at the colors, you will notice both the UK and France are depicted in dark blue, referring to their total investment level. When including angel, seed and series A funding, we find the UK and France received the greatest share of early stage investment according to our calculation, earning 24.59 and 24.04% respectively. However, the bubble for Germany is much larger than both the bubbles for either the UK or France, despite earning only 12.65% of all early investment funding. This is because the average amount of investment per deal is much higher than in either the UK or France. France, received the greatest amount of seed and series A deals during this time period, however, these deals are much smaller on average than they are in the UK or Germany. Investment share, Top 5 countries Country. Color shows sum of Amount (EUR). Size shows average of Amount (EUR). The marks are labeled by Country. The view is filtered on Country, which keeps France, Germany, Spain, Sweden and UK. SPAIN SWEDEN FRANCE GERMANY UK 563,217,330 Amount (EUR) 48 Early Stage Startups in Europe 14 Austria Czech Republic Iceland Belarus Luxembourg Malta Latvia Slovenia Portugal Romania Cyprus Lithuania Slovakia Hungary Greece Croatia Bulgaria 0.55% 0.11% 0.33% 0.08% 0.32% 0.08% 0.28% 0.08% 0.26% 0.07% 0.17% 0.26% 0.03% 0.15% 0.22% 0.02% 0.01% UK Finland France Switzerland Germany Ireland Sweden Denmark Spain Italy Netherlands Poland Belgium Russia Estonia Norway 24.59% 3.22% 24.04% 2.75% 12.65% 2.57% 7.20% 2.09% 3.95% 1.92% 3.83% 0.67% 1.82% 3.80% 0.58% 1.33% Amount of Early Stage Venture Financing COUNTRY Early Stage Startups in Europe 15 LATVIA LUXEM. ICELAND AUSTRIA POLAND ESTONIA NORWAY BELGIUM ITALY DENMARK IRELAND SWITZ. FINLAND RUSSIA NETHER. SPAIN SWEDEN GERMANY FRANCE UK 1400M 1600M 1800M 2000M 2200M 2400M 2600M 2800M 3000M 3200M 3400M 3600M 1200M 1000M 800M 600M 400M 200M 0M Investment per country, 2015-2018 (Q2), top 20 countries Investment per country, per quarter, 2015-2018 (Q2) Sum of Amount (EUR) for each country. Details are shown for Country. The view is filtered on Country, which keeps 20 of 33 members. Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 1000M 1100M 1200M 1300M 1400M 1500M 900M 800M 700M 600M 500M 400M 300M 200M 100M 0M AMOUNT (EUR)QUARTER Spain Sweden Germany France UK Early Stage Startups in Europe 16 While these funding trends are compelling, the story they tell is limited. Many of these companies consider themselves from the earliest days to be truly European, or global ventures, refusing to define themselves as headquartered in a certain place. Many of these companies operate in multiple geographies, often with distributed teams. It can be very difficult to define a company based on the location, when it is staffed by and comprised of team members from across the globe1. These graphs and tables aim to show a snapshot to show some broad trends, that can later be investigated. While these depictions of funding by geography offer some interesting trends, it is important not to box startups into one single geography. As we show later in this report, early stage companies in Europe often transcend multiple geographies. Founders with global outlooks tend to exhibit multiple transnational ties, and their companies, seeking a global market can, and are often headquartered in countries where the entire team might not reside permanently. 1 When it comes to determining attributing a country of origin for these companies, there often lacks a consensus. But for the purpose of quantitative analysis however, one has to make a distinction. Tech.eu's data makes a justification on a startup location by looking at a company's founding team and where the majority of the team is based. We use a multiple of sources to help make these distinctions, however, that doesn't necessarily make it easy. Take the case of Revolut, a company largely based in London, with a Russian-born founder, that is currently angling for a Lithuanian banking licence. Is the company British, Russian, or soon to be Lithuanian, based on the outcome of the licence? In this case, Tech.eu would attribute the company to the UK, as it where the company claims it's headquarters and where the founder seemingly resides. Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 400 500 350 450 300 250 200 150 100 50 0 NUMBER OF RECORDSQUARTER Spain Sweden Germany UK France Spain 44 50 37 78 30 38 33 71 37 70 28 80 27 31 82 49 79 41 36 75 97 75 64 39 67 99 73 54 38 58 85 84 60 25 50 112 79 73 40 60 151 90 65 33 70 134 114 92 36 85 195 112 60 38 73 136 93 96 41 73 137 119 46 17 73 143 135 80 17 22 Germany France Sweden UK Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 COUNTRY Early Stage Startups in Europe 17 Investment in early stage companies by sector "I believe Fintech is one of the most promising verticals in Europe today, as a unique combination of factors is pushing for unprecedented growth in the sector. First, recent regulatory push towards open banking creates new opportunities for disruptors; second, broad adoption of advanced AI techniques in this data- rich sector allows FinTech's to personalize their products and dramatically improve customer experience; finally, changing customer mentalities gives opportunities for Fintech to create and distribute complex financial products in innovative ways, while banks continue to experience lower customer trust and satisfaction. " MARIE-HORTENSE VARIN, PRINCIPAL AT PARTECH Partech is a global investment firm that was founded in Silicon Valley in 1982. Today they have over $1.2 billion under asset and finance a wide range of technologies and businesses for enterprises and consumers, from software, digital brands and services, to hardware and deep tech across all major industries. They enjoy a wide presence in Europe, operating out of offices in Paris and Berlin. 212,500 Amount (EUR) 28 Investment by Industry Industries - Split 1. Color shows sum of Amount (EUR) Size shows sum of Amount (EUR). The marks are labeled by industries - Split 1. FINTECH MEDTECH CONTENT GAMING MOBILITY ANALYTICS SAAS TRAVEL TECH EDTECH FUTURE OF WORK SECURITY IOT SPORTS WELLNESS MARKET- PLACE FASHION LOGISTICS AGRI TECH AGENCY PROP TECH CLEAN TECH ENERGY ROBOTICSCOLLAB-ORATIONTELECOMMARK- ETING DEV TOOLS FOOD TECH Early Stage Startups in Europe 18 Early Stage Investment by Industry Category LEGALTECH KIDS SOCIAL PETS GOVTECH ANALYSIS DEAL COMPARISON AGENCY PUBLISHER TOOLS ENGINEERING COMPARISON EVENTS MUSIC AGRITECH SEMICONDUCTORS LOGISTICS TELECOM COLLABORATION ROBOTICS SPORTS WELLNESS MARKETPLACE FASHION ENERGY CLEANTECH PROPTECH IOT FUTURE OF WORK EDTECH SECURITY DEVELOPER TOOLS FOODTECH SAAS MOBILITY CONTENT FINTECH MEDTECH ANALYTICS MARKETING TRAVELTECH GAMING 400M 500M 600M 700M 800M 900M 1000M 1100M 1200M 1300M 1400M 1500M 1600M 1700M 1800M 1900M 2000M 2100M 2200M 2300M 2400M 300M 200M 100M 0M AMOUNT (EUR) INDUSTRIES Following Marie-Hortense Varin's expectations, Fintech garners the greatest amount of overall early stage investment during 2015-2018 (Q2). Traveltech Iot Marketing Proptech Dev Tools Cleantech Foodtech Energy Security Edtech Fashion Future of work Marketplace 520.31M 293.03M 506.67M 257.47M 469.02M 241.96M 431.34M 229.64M 345.04M 384.10M 207.47M 375.51M 203.06M Fintech INDUSTRIES Medtech SaaS Analytics Mobility Content Gaming 2,318.20M 2,070.55M 800.72M 738.31M 667.63M 586.50M 534.67M Early Stage Startups in Europe 19 The above bubble graph displays the top 10 highest average investments per deal across all European early stage venture funding. When looking at the average values, we find that the category with the largest average investment across the continent is in Medtech, with an average investment of just under 4 million euros. The second highest average investment category is semiconductors, followed by fintech and then robotics. Average Investment by Industry Category, top 10 fields (Early Stage Ventures in Europe, 2015-2018 Q2) Average Investment by Industry Category, top 10 fields, per deal (Early Stage Ventures in Europe, 2015-2018 Q2) FINTECH ROBOTICS GAMING DEVELOPER TOOLS MOBILITY AGRITECH SECURITY EDTECH SEMICONDUCTORS MEDTECH Robotics Security Fintech Agritech Semiconductors Edtech Medtech Mobility Developer tools Gaming 2.33M 3.20 2.39M 3.80 2.49 3.83 2.97 3.11 3.13 3.17 Early Stage Startups in Europe 20 LEGALTECH PETS MUSIC KIDS GOVTECH ANALYSIS DEAL COMPARISON SPORTS PUBLISHER TOOLS ENGINEERING COMPARISON EVENTS FASHION SEMICONDUCTORS LOGISTICS TELECOM COLLABORATION AGRITECH EDTECH MOBILITY ENERGY ROBOTICS WELLNESS MARKETPLACE AGENCY SOCIAL NULL CLEANTECH ANALYTICS PROPTECH IOT FUTURE OF WORK SECURITY DEVELOPER TOOLS FOODTECH SAAS CONTENT FINTECH MEDTECH MARKETING TRAVELTECH GAMING 400K 600K 800K 1000K 1200K 1400K 1600K 1800K 2000K 2200K 2400K 2600K 2800K 3000K 3200K 3400K 3600K 3800K 4000K 200K 0K AVG. AMOUNT (EUR) INDUSTRIES 0.07M 0.80M 1.12M 1.24M 1.38M 1.38M 1.48M 1.48M 1.50M 1.53M 1.60M 1.60M 1.66M 1.69M 1.69M 1.69M 1.72M 1.73M 1.77M 1.78M 1.78M 1.82M 1.88M 1.88M 1.94M 1.97M 2.04M 2.08M 2.13M 2.19M 2.25M 2.26M 2.33M 2.39M 2.49M 2.97M 3.11M 3.13M 3.17M 3.80M 3.20M 3.83M Average Investment by Industry Investment by Industry, Size of Median Investment (per deal) ROBOTICS GAMING DEV TOOLS MOBILITY SECURITY AGRITECH EDTECH SAAS SEMICONDUCTORS MEDTECH FINTECH 1,000,000 Median amount (EUR) 2,000,000 Early Stage Startups in Europe 21 Average Amount (EUR) Median Amount SaaS Robotics Security Fintech Agritech Semiconductors Edtech Medtech Mobility Developer tools Gaming 2,225,000 3,168,000 2,331,000 3,202,000 2,391,000 3,801,000 2,494,000 3,834,000 2,967,000 3,106,000 3,126,000 1,000,000 2,000,000 1,309,200 1,365,000 1,000,000 1,752,000 1,000,000 1,518,000 1,363,000 1,200,000 1,200,000 However, when we instead compare the median investment values per industry, a few significant results jump out. When evaluating all categories, average values, can be influenced by outlying variables. Investment trends are particularly sensitive to outlying figures. This can result when you have a number of particularly high deal rounds (or particularly low ones), which can push the average values upwards (or downwards). For example, a very large round, such as UK challenger bank, Starling Bank's 48 million Series A round, received in January 2016 effectively inflates all UK early stage fintech rounds, by it's very inclusion in the frequency. When we rely on the mean value, or look only at the absolute value when it comes to funding levels during a certain quarter, particularly valuable deals like Starling Bank's can impact how we interpret the overall quality of the ecosystem. Another way to evaluate the overall quality of the ecosystem that can reduce the distortions created by outlying figures is by comparing the average value to the median value. Earlier, we described how median values can remove some of the distortions that occur when particularly large deals are signed. When looking at the above table, we can see that the average value is much higher than the deal median. Median values are calculated by identifying the middle value of a string of numbers. An equal number of values will come before and behind the median value, putting it somewhere at the midpoint. Making country- or sector- generalizations about investments has only a limited value, given the considerable variance between companies. However, the median value can help point to certain patterns in the data, such as indicating what type of companies tend to receive higher deals compared to others. Here, we find that robotics startups have the highest median value when compared across the entire spectrum of industries. This indicates that the midpoint of the distribution of investments to robotics startups in our dataset is higher than that in other industries we analyze. Industries Early Stage Startups in Europe 22 Early Stage Investment, Fintech totals (2015-2018 Q2) Early Stage Investment, Number of Fintech deals (2015-2018 Q2) Looking at the average and median values of funding rounds can help give a more nuanced picture when compared to depictions of absolute values, as we see in the Fintech graph above. The graph clearly shows that the UK attracts the greatest amount of investment and the most deals across the continent in this category. LATVIALUXEMBOURGLITHUANIAHUNGARYCZECH REPUBLICSLOVAKIAAUSTRIAPOLANDESTONIASLOVENIANORWAYBELGIUMITALYCYPRESSDENMARKIRELANDSWITZERLANDFINLANDRUSSIANETHERLANDSSPAINSWEDENGERMANYFRANCEUK700M 800M 900M 600M 500M 400M 300M 200M 100M 0M AMOUNT (EUR)FRANCE SWEDEN GERMANY UK NETHERLANDS 200 220 240 180 160 140 120 100 80 0 60 40 20 NUNMBER OF RECORDS Early Stage Startups in Europe 23 Median Investments in Fintech, top 5 countries There might be a few interesting reasons for this. First, we have to keep in mind that the overall investment level into the UK is much higher than that of Germany's. The UK median is lower because the UK's total deal flow also includes a higher frequency of smaller deals as compared to Germany, moving the median downwards. Does this mean that the fewer investments funded in Germany tend to be of higher quality and higher value than those in the UK? While this might be a simple conclusion to draw from these depictions, it is often inappropriate to compare deal flow numbers like this. Germany and the UK (and indeed, all other countries in Europe) have different practices when it comes to reporting deal flow. Countries with a greater number of international investors (such as the UK) tend to be more visible and open with their funding rounds and the deals that they make. Many private deals are only disclosed-- and thus the totals invested are not known. So it is important to use these figures as suggestive depictions, rather than an exhaustive account of an incredibly diverse and varied landscape. Netherlands Sweden France Germany UK Industry SaaS 1,000,000 1,030,000 1,400,000 3,050,000 1,818,181 FINTECH UK FINTECH FRANCE FINTECH NETHERLANDS FINTECH SWEDEN FINTECH GERMANY Early Stage Startups in Europe 24 Early Stage Investment, Number of Fintech Deals Rather than comparing countries against one another, which is inexact and has limited leverage-- a more valuable assessment is to compare country performance over time. By looking a one country's performance over time, you can begin to build a relative picture of that country's performance. Here, when we look at fintech deals from 2015 to 2018, we see the distribution of deals for top five countries in fintech. Industries Split 1 / Quarter, Fintech Netherlands 6 2 9 1 4 13 5 5 2 11 6 1 5 8 13 1 2 11 17 5 7 7 7 12 12 7 1 10 17 13 4 9 15 10 14 2 9 21 15 13 1 12 18 11 15 1 12 28 10 5 3 14 19 8 8 3 5 26 9 13 1 14 16 8 9 6 3 Sweden UK France Germany Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 COUNTRY Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 20 10 30 40 50 60 0 NUMBER OF RECORDSNetherlands France Sweden Germany UK Early Stage Startups in Europe 25 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 AMOUNT (EUR)Netherlands Sweden France Germany UK 200 220 180 160 140 120 100 80 0 60 40 20 Fintech Total Investment What we see from the above graph is that when it comes to investment in European fintech, the landscape has diversified across the past three years in question. While the UK has tended to capture a significant amount of deals in fintech-- we find that in the last six quarters, overall investments are higher and that the distribution of spending is much more varied than it has been in previous years. AMOUNT (EUR) Early Stage Startups in Europe 26 Beyond VC: How companies raise investment outside VC While European founders are raising more investment than ever before, at the same time founders are looking beyond venture capital. Increasingly, founders are turning to alternative models of investment to advance their companies. Some of these strategies include equity crowdfunding, ICOs/ token sales, or bootstrapping to revenue models. Systematic data on these various funding models remains limited. The European Business Angels Network estimated that equity crowdfunding captured 5.5% of the early stage investment market in 2017, for a total investment of 63 million.2 However, a European Union Factsheet announcing the EU's new #crowdfundingEU initiative citing data from the Cambridge Centre for Alternative Finance puts the value of crowdfunding across Europe much lower, at only 7.7 billion. Despite the uncertain figures, today, more crowdfunding platforms are available to European companies than ever before, including Seedrs (UK), Mymicroinvest (Belgium), Crowdcube (UK), FundedByMe (Sweden), Invesdor (Finland), Companisto (Germany), SPREDS (Belgium), Funding Circle (UK), Seedmatch (Germany), Funderbeam (Estonia), WiSEED (France) and Startupxplore (Spain). Another growing investment model, Initial Coin Offerings, or ICOs have also become a popular way for founders to grow their ventures. Here as well, the data on the magnitude of this investment remains mixed. According to the European Business Angels network, ICOs were estimated to attract 1.75 billion in Europe in 2017.3 Alternatively, data shared by Funderbeam found a much smaller share of investment, finding ICOs raised just $637 million for European companies in 2017, accounting for 3.83% of the $16 billion raised overall through traditional investment.4 2 European Business Angels Network 2017 Compendium, released 2018. Available at: http://www.eban.org/wp- content/uploads/2018/07/EBAN-Statistics-Compendium-2017.pdf 3 Ibid. 4 Initial Coin Offerings Funding Report, Funderbeam. Available from https://3tscapital.com/wp-content/ uploads/2017/12/ICO-Funding-Report-2017.pdf Reported in Tech.eu as "European ICOs have raised $637 million this year but lag behind the US" Tech.eu by Jonathan Keane, 22 November 2017. Available at: http://tech.eu/brief/ european-icos-funderbeam/ Early Stage Startups in Europe 27 Artificial Intelligence Technology Trends European companies are among some of the world leaders in AI technology. DeepMind technologies, a British AI firm bought by Alphabet in 2014 applies their research to solving some of the world's most complex questions. DeepMind has put their technology to work in many capacities, from treating eye diseases, to teaching computers to build visual representations of interior landscapes. Bloomsbury AI, another UK artificial intelligence company purchased by When examining technology trends in Europe, Artificial Intelligence (AI) is often cited as one of the most exciting developments, becoming an integral component across all industry verticals. The European Commission has identified AI as an area of strategic importance for the digital economy, citing it's cross cutting applications to robotics, cognitive systems and big data analytics. "The industry is unanimous: AI will change the world and be ubiquitous in tomorrow's economy. AI major gains are likely to focus on productivity, efficiency, automation and costs, enabling consumers and businesses to capitalise on the digital economy. However, companies that fail to recognise the advent of AI and respond to them by disrupting themselves, innovating and re-engineering their business models will, at best, lose their competitive advantage, and at worst, disappear."5 5 "Harnessing the economic benefits of Artificial Intelligence" European Commission Digital Transformation Monitor, November 2017. Available at: https://ec.europa.eu/growth/tools-databases/dem/monitor/sites/default/files/DTM_ Harnessing%20the%20economic%20benefits%20v3.pdf " "Artificial Intelligence is the most important technology of the 21st century. Those who build the strongest AIs, will control the world." FABIAN J. G. WESTERHEIDE, MANAGING PARTNER, ASGARD CEO OF THE RISE OF AI CONFERENCE AI COORDINATOR BUNDESVERBAND DEUTSCHE STARTUPS " Early Stage Startups in Europe 28 6 "Artificial Intelligence activities" in DG CONNECT. By Anne Bajart, Head of Sector Robotics Industrial Development and Impact Robotics and Artificial Intelligence, Directorate-General for Communication Networks, Content and Technology, European Commission. Available at: https://ec.europa.eu/growth/tools-databases/dem/monitor/sites/ default/files/6%20Overview%20of%20current%20action%20Connect.pdf 7 "Artificial Intelligence A strategy for European startups Recommendations for policymakers." Asgard VC and Roland Berger. Released 14 May 2018. Available from https://asgard.vc/wp-content/uploads/2018/05/Artificial-Intelligence- Strategy-for-Europe-2018.pdf Page15. European Share of AI Companies, from Asgard VC and Roland Berger's global list of AI companies, 2018 1 Number of Records 245 Despite accounting for almost a quarter of all AI startups globally, and some of the world's most promising companies, Europe falls behindboth in patenting and investmentwhen compared to global AI leaders, the United States and China.7 In an effort to support this, the Commission's Horizon 2020 funding includes considerable funding AI, allocating 700M EU funding specifically Facebook in 2018 works to fight fake news using natural language processing. BenevolentAI, another UK-based AI company is worth an estimated $2 billion. The company applies its AI algorithms to drug discovery in an effort to design new molecules to treat disease. Across Europe, innovation in AI remains an area of growth. Asgard, a Berlin-based VC firm specializing in AI technologies, alongside German consulting firm Roland Berger identified 789 AI companies in Europe, reflecting nearly 23% of the global total.6 The UK, with 245 AI startups ranks fourth globally, after the United States, China and Israel. France and Germany appear at places 7th and 8th in the global rankings. Early Stage Startups in Europe 29 8 "Artificial Intelligence activities" in DG CONNECT. By Anne Bajart, Head of Sector Robotics Industrial Development and Impact Robotics and Artificial Intelligence, Directorate-General for Communication Networks, Content and Technology, European Commission. Available at: https://ec.europa.eu/growth/tools-databases/dem/monitor/sites/ default/files/6%20Overview%20of%20current%20action%20Connect.pdf for robotics and AI components (out of an overall investment of 2.8 billion), 120M for the AI- enabled "Human Brain" project, 250M for a program on AI and big data analytics, 20M for IoT pilot on autonomous vehicle and a further 20M for their AI-on-Demand platform.8 These public investments are integral for the development of early stage companies utilizing AI, especially as these exciting technologies begin to find more and more marketable use cases. European Share of AI Companies, from Asgard VC and Roland Berger's global list of AI companies, 2018 ICELAND LUXEMBOURG SLOVAKIA AUSTRIA MALTA PORTUGLA SLOVENIA LATVIA LITHUANIA BELARUS CZECH REPUBLIC ESTONIA ROMANIA UKRAINE BELGIUM HUNGARY DENMARK POLAND NORWAY RUSSIA IRELAND GERMANY FINLAND SPAIN UNITED KINGDOM FRANCE SWEDEN ITALY NETHERLANDS SWITZERLAND 40 60 80 100 120 140 160 180 200 220 240 260 20 0 NUMBER OF RECORDS COUNTRY Early Stage Startups in Europe 30 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 250 200 150 100 50 0 Funding Amount (in $M) Number of Deals As AI innovation continues to develop, investors have increasingly begun to support early stage European companies working with these technologies. The graph above, generated from data collected by CB Insights shows a strong upwards trajectory in seed, and Series A funding for European companies utilizing AI technologies in Europe. This follows a general increase in the Seed and Series A Investment in Europe, Artificial Intelligence, 2015 - 2018 (Q2), CB Insights Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 43.9 36.7 17 24.6 79.1 60.3 65.3 88.2 105.1 114.8 99.6 195.2 176.1 204.6 21 28 16 30 37 30 40 38 68 39 78 64 82 69 Funding Amount (in $M) Number of Deals Early Stage Startups in Europe 31 Machine Learning Machine learning is a unique branch of artificial intelligence that automates analytical model building. The science behind machine learning is not new, but today's big data capabilities allow algorithms to adapt and react to previous results. Machine learning has significant implications for many applications, from the ability to achieve higher levels of efficiency, automate repeated applications, identify insight in data and make future predictions using existing data points. Machine learning technologies represent a significant part of all investment into European AI startups. When looking specifically at investments in seed and Series-A rounds for European startups developing these technologies, we find a clear upwards trajectory, according to data collected by CB Insights. Deals made for companies working with machine learning started slowly in 2015, but has since gained significant traction. In Q2 2018, a high of $65 million was invested into early stage companies developing machine learning technologies. This figure represents nearly 32% of all early stage funding invested into AI startups across Europe. Seed and Series A Investment in Europe, Machine Learning, 2015 - 2018 (Q2), CB Insights Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 70 35 60 30 50 25 40 20 30 15 20 10 10 5 0 0 Funding Amount (in $M) Number of Deals number of deals made across the continent at this early stage, beginning with 21 deals in Q1 2015 and rising to 69 in Q2 2018. The largest Series A investment to a company working with AI technology in the last three years was made to Ada Health, a Berlin based firm utilizing AI to become the "Alexa for health." Launched only in 2016, the company has become one of the world's fastest growing medical apps. The Series A round was valued at $47M (40M).9 9 "Berlin's Ada Health raises $47M to become the Alexa of healthcare." Mike Butcher, TechCrunch 31 October 2017. Available at https://techcrunch.com/2017/10/31/berlins-ada-health-raises-47m-to-become-the-alexa-of-healthcare/ Early Stage Startups in Europe 32 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 70% 80% 60% 50% 40% 30% 20% 10% 0% Percentage of investment made into Machine Learning out of total AI investment (Seed and Series-A rounds in Europe 2015-2018 Q2) CB Insights Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 8.42 7.27 4.49 6.48 12.4 16.1 44.4 23.3 19 38 53.6 33.3 60.1 65 6 8 4 5 16 13 17 12 16 17 30 21 27 17 Funding Amount (in $M) Number of Deals Early Stage Startups in Europe 33 Blockchain Blockchain, the "technological heart" and infrastructure behind the Bitcoin cryptocurrency, provides a secure way to share information, reducing the need for intermediaries and regulatory authorities. The technology has multiple applications for secure information storage, with probable use cases across many verticals, for example, enterprise software, SaaS, and most importantly, fintech. Blockchain technologies have paved the way for the flourishing investment markets for ICOs, as we detail elsewhere in this report. Blockchain remains new, and the growth and utilization of blockchain technologies outside of Bitcoin has been associated with considerable hype and speculation. This hype is often fueled by ICOs and public involvement in token sales, and due to this fragmented landscape, it often remains difficult to capture robust data on the investments in this sector. The graph below, generated from data collected by CB Insights on European companies utilizing Blockchain technologies in Europe, gives some insight into the investment in this space. We see that the amount of seed- and Series-A deals into these companies has ranged between 2, and 26 deals per quarter from 2015 to 2018. Seed and Series A Investment in Europe, Blockchain, 2015 - 2018 (Q2), CB Insights 10 "Digital Transformation Monitor: Blockchain." European Commission, January, 2018. Available at: https://ec.europa. eu/growth/tools-databases/dem/monitor/sites/default/files/DTM_Blockchain%20v2_0.pdf Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 30 25 20 15 10 5 0 0 Funding Amount (in $M) Number of Deals 250 300 350 200 150 100 50 "Although some Blockchain applications are fully deployed and can be considered mature, the technology still has substantial limitations."10 " Early Stage Startups in Europe 34 Most notably, we see a considerable spike in investment in Q2 2017, this figure captures a few notable ICOs. First, in May 2017, Spanish-Swiss Aragon raised nearly $25 million in 26 minutes11. According to Aragon, at the time, this investment represented the fourth largest crowdfunding event in history, and the second largest in blockchain. The next month, they were shortly outdone by the Swiss-based Bancor Protocol, which raised an estimated $153 million in three hours12. The crowdfunding round was led by Tim Draper and Blockchain Capital. A week later, Russia's SONM, a decentralized fog computing platform raised $42 million in four days13. 11 "The Aragon Token Sale: The Numbers." Argon Blog. Available at: https://blog.aragon.org/the-aragon-token-sale- the-numbers-12d03c8b97d3/ 12 "Bancor Protocol: Token Launch Report" Smith and Crown analytics. Available at: https://www.smithandcrown.com/ sale/bancor-protocol/ 13 "SONM "Spectacularly Successful" ICO Nets $42 Mln in Four Days." Coin Telegraph. Available at: https:// cointelegraph.com/news/sonm-spectacularly-successful-ico-nets-42-mln-in-four-days Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 6.32 5.82 3.26 2.98 7.02 1.66 13.5 6.85 36.6 290.1 19.1 39.1 15.2 56.1 8 11 6 9 6 2 16 10 17 15 15 15 14 26 Funding Amount (in $M) Blockchain Number of Deals Early Stage Startups in Europe 35 Case Study: ObjectBox The experience of early stage companies in Europe: Acceleration Programs ObjectBox, based in Munich and London is an easy & fast object-oriented mobile database for Android and Linux. ObjectBox enables app and IoT developers to devote their valuable time to what makes their apps stand out instead of bothering with storing and retrieving data. The story of ObjectBox began when cofounders Markus Junginger and Dr. Vivien Dollinger met at university in Augsburg where they were studying multimedia. After university, they re- connected and founded their first company together, greenrobot in 2009. Six years later, they changed focus and started ObjectBox. From early on in ObjectBox's creation, Vivien and Markus knew they wanted to join an accelerator program. With their previous company, the founders had already tried to build their own products on the side of their client's work. They found that the process often became frustrating, as client's projects rarely left time to work on their side projects. The team decided that rather than split their attention, they needed to go all in on a new venture. Vivien explains, "It was a very tough decision and the time before Techstars was really hard. As ObjectBox requires a lot of upfront development work, fully self-financing until revenue was out of range for us. So, the time was running.That put a lot of pressure on us. In retrospect, it was the right decision." When Vivien and Markus decided to take the plunge with ObjectBox, they quickly developed a prototype and applied to Y Combinator. They were surprised when they were called for an interview shortly afterwards and when they interviewed Vivien admits they weren't ready. Without adequate preparation, their application to YC was not accepted. The team did not give up and next focused their attention on applying to an accelerator in Berlin. By then, they "Right from the start when we first had the idea in summer 2015, we knew ObjectBox would need VC funding. Because ObjectBox is a database and thus a highly technical product, it just requires a lot of upfront work. And as a team of two from Germany with a rather technical local network, we decided on that very day, we needed to be part of one of the top accelerators first.." DR. VIVIEN DOLLINGER, CO-FOUNDER AND CEO OF OBJECTBOX " Early Stage Startups in Europe 36 had released a very early alpha version, and were invited for a telephone interview, which Vivien recounts "we - again - failed very much." But they remained motivated. Vivien and Markus applied to the same accelerator for a second time, and were finally offered an onsite interview. But despite their chances to succeed increasing nearly to 50% at this stage, Vivien and Markus learned that they had failed again. Despite the bad news, the team refused to give up. Not long after their third unsuccessful accelerator interview, the accelerator staff invited Vivien and Markus to interview with their programs in London and New York. After 20 rounds of interviews and multiple re-written applications, the team's perseverance paid off when Vivien and Markus were finally accepted to Techstars in 2017. Markus Junginger and Dr. Vivien Dollinger, Co-Founders of ObjectBox What advice do you have for others looking to apply to an accelerator program? "We didn't know anyone [at Techstars], so in retrospect I think we were incredibly lucky that we somehow got picked out of the many Berlin applications...once you are at the interview stage other Techstars MDs will look at your company too...Do get someone who is in the network to recommend you!" DR. VIVIEN DOLLINGER, CEO AND CO-FOUNDER OF OBJECTBOX Early Stage Startups in Europe 37 Case Study: FindMeCure London- and Sofia- based FindMeCure is the "Google for Clinical Trials." The company helps anyone easily find future treatments and apply for participation in studies within a few clicks. In 2017, the company went through a London Accelerator program and has gone on to raise follow on investment from Techstars and LAUNCHub Ventures. FindMeCure's founding team met in
Seed the future - A deep dive into European early-stage tech startup activity
Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
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