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
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$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
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$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)
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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.
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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.
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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
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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.
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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.
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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.
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EuropeanStartups.co
Future:
What’s needed most in the next five years
Helping the current generation of startups.
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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
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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
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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.
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EuropeanStartups.co
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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
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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.