EUROPE HAS NEVER BEEN BETTER
FOUNDER AND MANAGING DIRECTOR,
DN CAPITAL AND CHAIR, INVEST EUROPE
We are setting new records
Source: Invest Europe EDC Data; Pitchbook
Results: Best returns ever
Source: State of European Venture, Atomico
Net IRR %
Top quartile performance (net internal rate of return) of EIF-backed VC funds by vintage year
Results: Most unicorns ever
1 2 3
2005 2010 2011 2012 2013 2014 2015 2016 2017 2018
Cumulative number of $bn+ companies founded since 2003
Source: State of European Venture, Atomico
€24bn €13.5bn €9.2bn €7.8bn €6.5bn €5.7bn €5.7bn €4.2bn €3bn €1.5bn €1.5bn €2.6bn
All of these companies will return over 1x the VCs funds
The European ecosystem has come a long way
Major US funds
start investing in
Skype acquired for ~€2.2bn.
2011 acquired again for ~€6.2bn
IPO for ~€5.3bn
Now worth €8.0bn
VC funding exceeds pre-
Delivery Hero IPO for
Now worth €6.53bn
Adyen IPO: ~€13.5bn on 1st
day of trading.
Now worth €19.5bn
Farfetch IPO for
IPO for ~€1.85bn
Now worth €4.85bn
2000 2005 20182007 20162010 20172014
A new ecosystem is emerging in Europe
The emergence of
… supported by high profile,
experienced seed and
series A funding…
… while major events
and groups are nurturing
… helping to create
the new generation
of successful entrepreneurs
The Emergence of serial entrepreneurs
Brent Hoberman Oli Samwer Fabrice GrindaNils Regge Niklas Zennstrom Xavier Niel
Backed by experienced seed and venture funds
1996 2006 20092000 2011 2012 201520131997 2003
I am feeling great because as a Venture guy you don’t often get to stand up at this conference, but I am glad to see that more and more of my Venture colleagues are here today.
I could spend a ton of time telling you about PE and buyouts but I am a Venture Capitalist and that would bore you to death.
I could also talk about Brexit and that would make you cry
I could also talk about the England, German and Italy performances in the World cup but that could also make you cry
So instead I am going to talk about is the renaissance of VC in Europe.
As you can see, Venture Capital is setting new records with € 11 billion raised by European VCs in 2018 and €7.2 billion invested in European start-ups (highest level ever recorded).
2018 was also the best year ever in terms of exits of VC-backed companies with €48 billion returned to investors.
Not only is this creating great value for the founding entrepreneurs and investors, it is also making a big impact into the Economies where these companies were created in terms of jobs and GDP. Just look at Berlin today vs. where it was 10 years ago.
The investors in Venture Capital Funds are happy too.
Look at these returns
EIF is also happy
Let’s talk about Unicorns. A Unicorn is a company valued at over $1bn.
In 2005 we had 1 Unicorn company in Europe.
Today we have 61.
This is significant.
Why? Because without these fund returning companies it is hard to make the Venture Capital model work.
So we all like unicorns
(Aren’t they pretty?)
As Venture Capitalists we need them and here is why: for example if you take a €200M fund and assume a 10% ownership on all exits , you will need €6bn of market cap in order to get a 3x return.
Of course if you have an average ownership of 20% on exits you will only need a €3bn of market cap. However you still need €3bn! This is not insignificant.
If you have a €500M fund you need €15bn. Think about that…
Hence, without Unicorns in your portfolio the model is not going to work.
But actually in reality for us Venture Capitalists it’s all about Dragons.
One of my favourite movies
What is a dragon? Dragons are successful investments that return at least 1x the VC’s fund.
Here are some European tech dragons: Spotify, a Swedish digital music company, went public last year at a valuation of nearly $30 billion. The early stage investors made over 5x their funds. European payments platform Adyen floated at $8 billion which resulted in fantastic returns for Index Ventures (2-3x the fund) Auto 1, a company that for which we led the Series A, last year raised €450mn from Softbank at a €2.9bn valuation. That is about a 2x fund value
These are the type of returns that traditionally only VCs from Silicon Valley have achieved. Today European Venture performance has reached world-class levels.
With 40% - 50% loss rates on early stage investments, Venture Capitalists need dragons to make the model work.
Just taking a little step back let’s look where we have came from in the European Venture Ecosystem since I have been in the industry: Prior to 2000 VC in Europe was guys in white coats and accountants Starting in year 2000, that is when Accel and Benchmark first arrived in Europe and also when Index launched its first institutional fund Then we had the Skype exit – the first $1billion Venture-backed exit in Europe Which then led to the following exits: Zalando, Just Eat, Delivery Hero… all exits of over €5 billion each. This was unprecedented. In 2018, we took things to a new level with Spotify going public at a valuation of nearly $30 billion, Adyen IPO at nearly $8 billion and Farfetch IPO on the NY stock exchange at over $5 billion.
These global category winning companies have put Europe on the map for Venture Capital on a global basis.
I think these four factors are the key drivers of the current success of the European ecosystem: The emergence of serial entrepreneurs Supported by experienced Seed and Series A funding and growth capital Major events nurturing the ecosystem, like the Investors’ Forum All leading to the creation of a new generation of successful entrepreneurs
Let’s look at each of these points
Serial entrepreneurs are very important! In Silicon Valley it is not uncommon for the best funds to continue to back the same groups in various companies.
Serial entrepreneurs also often go and create some of the best companies. If you look at the original Paypal founders, one of the best funding team ever, they went off to create Linkedin, Tesla, Facebook and Youtube.
These six European serial entrepreneurs above have created some of the best companies in Europe
And more importantly have come back to create new companies as well as start funds – putting new capital and knowledge into the system
Unlike 2000, Europe today also has a deep bench of experienced and successful Venture Capitalists.
Many firms are on their fourth or fifth Fund, showing a deep track record and experience base.
Just like plants need light, water and soil, Startups need ideas, execution and capital. In fact, a lot of capital. The average Unicorn raised over €250 million during their life.
There are a few special investors that I want to mention now…
Pär-Jörgen Pärson from Northzone who will speak tomorrow
Par has made 4 unicorns investments - Spotify, Avito, iZettle and TrustPilot - generating over €1 billion in profits to LPs
He should stand in the European Venture Hall of fame and we all salute him. If you see him around pat him on the back.
And by the way he plays guitar like Jimmy Page. So very multi talented. And looking forward to see him on skis this weekend.
And of course the King Neil Rimer.
Index, as a firm, has invested in more unicorns than any firm in Europe. They are also considered now in the top 5 VC firms globally.
Of course, we need a challenger and I am sure there is one in the room
Last but not least we have a thriving next generation of entrepreneurs in Europe
Things are moving fast, in fact very fast. Going from 0 to €1 billion of market cap has never been faster (5 years on average)
The great thing about European Champions is that they can come from anywhere
UI Path comes from Romania, Auto 1 from Berlin N26 from Berlin Revolut from London with a Russian founder
And as I mentioned, European champions can come from anywhere…
Even small European countries can create Global Champions
So lets keep winning and suporting Venture Capital in Europe
Note to Nenad: I suggest you delete all of the below:
A few comments on Invest Europe and why it is important:
Invest Europe is the voice of European private Capital, advocating on policy affecting private capital investment in Europe.
Invest Europe provides political advocacy, industry promotion, industry standards, data and research and Industry Networking for over 30 years (founded 1983).
I value this organization, I have enjoyed my time contributing and I encourage you to get involved
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