Venture Capital in Europe & Israel: June to September 2014

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

http://www.twitter.com/gdibner

http://yankeesabralimey.tumblr.com/

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



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

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VC Investments in Europe & Israel, June-September 2014

Invested amount (US $M) Number of investments @gdibner

blog: yankeesabralimey 3



70 97 57 65

108 103

60

168

262 171 342

26

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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



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

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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




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

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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





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





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

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Average investment size in Europe and Israel by bracket, Jun-Sep 2014

Benelux DACH France Iberia Israel Nordic UK & Ireland




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





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





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

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Israel Nordic DACH France Iberia Benelux East. Eur. South. Eur.

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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





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

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Israel DACH Nordic Iberia Benelux France East. Eur. South. Eur.

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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





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%

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Seed (<2) Early Venture (2-8) Venture (8-20) Growth (20-100) Mega (>100)

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Did US VC firms participate in European & Israeli VC rounds?

Yes No @gdibner blog: yankeesabralimey 13



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

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In which countries are US VCs most active? June to September, 2014

No US VC involved US VC involved @gdibner blog: yankeesabralimey 14




US VC firms follow Tier 1 firms • US VC firms are three times

more likely to participate in rounds alongside Tier 1 investors

88%

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US VC involved No US VC involved @gdibner blog: yankeesabralimey 15




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

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)




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

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99 148

49 123

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206 430

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DACH UK & Ireland

Israel Nordic Iberia France Benelux East. Eur. South. Eur.

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Investment in Europe and Israel by target market by country June to September 2014 (US $M)

OEM Government Telecom SMB Enterprise Consumer @gdibner





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%

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East. Eur.

Israel

UK & Ireland

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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





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%

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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





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%

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Investment in DACH by target market by stage bracket June to September 2014 (Number of investments)

Consumer Enterprise Government OEM @gdibner blog: yankeesabralimey 21




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)





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




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)





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

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Semiconductors

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Marketplace

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VC Investments in Europe & Israel June to September, 2014

US VC involved No US VC involved @gdibner blog: yankeesabralimey 25




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



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

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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




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

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Early Venture (2-8) Venture (8-20) Growth (20-100)

Average round size, US $M





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

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Early Venture (2-8) Venture (8-20) Growth (20-100)

Average round size, US $M




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

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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




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

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Fintech VC investment in Europe and Israel by bracket by region, Jun-Sep 2014

SMB Enterprise Consumer @gdibner blog: yankeesabralimey 31




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

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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




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





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

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Consumer electonics VC investment in Europe and Israel by bracket by region, Jun-Sep 2014

Early Venture Venture @gdibner blog: yankeesabralimey 34




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.

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http://yankeesabralimeysignup.myinstapage.com/

Venture Capital in Europe & Israel: June to September 2014

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Transcript of Venture Capital in Europe & Israel: June to September 2014