Despite the ‘expected’ slowdown in investments due to Brexit, European startups managed to stay afloat with the fueled capital. French investment advisors Clipperton teamed up with DigiMind’s FundedHere to publish an annual report studying the trends of European innovation system.
The European Union witnessed an investment of about $12 billion in the startups, with the year showing numbers as good as 2015. However, UK has managed to play a prominent role in driving the figures with the report noting 24 per cent growth for UK transactions in the first half of the year.
Even though it’s a little too soon to comment on the impacts of Brexit, i.e. the vote by British public to leave the European Union which happened in the middle of the year but since then, a little decrease has been observed in the startup investment scenario. The report’s authors state,
The dynamics will have to be monitored closely as the real impact of the Brexit is still ahead of us.
This is completely true, as UK is yet to begin the two-year process to leave EU, which will be initiated by the government by March end this year.
The report made some interesting observations, it says a larger number of deals were worth than $30 million which compensated the decline to a large extent. This signifies investors across Europe are spreading their bets further.
The number of transactions is clearly on the rise (+40% yoy in 2016) suggesting fewer large deals but a handful of start-ups which will seek acceleration rounds in the next 12 to 18 months.
The report also notes the rising interest for tech investment among private equity funds, where KKR made landmark minority investments in OVH (hosting) and Darktrace (cyber); and several big players introduced significant new funds dedicated to technology and growth equity.
The authors further point out the increase in direct investment by corporates. They recorded announcements of 943 deals between $1 million and $10million in 2016, which shows a rise of more than 50 percent comparing with 2015.
The amount invested in the $1 million to $10 million segment was $3.6 billion, akin to the amount for deals lying in $10 million-$30 million range. The latter, i.e., the acceleration rounds of funding saw an upward trend in the second half of the year, 19 percent more from the value of 2015.
This implies, last year, the decrease was mainly in the larger round size declining in Europe, which the authors believe could prove as the bedrock for a sustainable investment ecosystem in the region. They went on to highlight,
Our data highlights a real slow-down in large rounds in 2016 despite the strong activity by large PE and Corporates; potentially a healthy pause in the European ‘unicorns’ phenomenon.
Among the top five deals in the EU, top three were French startups, namely, web hosting company OVH; IoT connectivity platform Sigfox; and audio kit maker Devialet, with other two being UK startups, on-demand food delivery platform Deliveroo; and DNA sequencing firm Oxford Nanopore.
While the UK owns the largest pie in the European startup investment ecosystem, with $4.1BN invested into its startups last year, France has been catching up. The country saw a 22 percent increase in investment value vs 2015, according to their data, with French startups receiving about $2.7 billion in 2016.
France seems to be one of the European countries that will gain from Brexit in the coming years at the UK’s expense. While investment in startups in Germany, Austria and Switzerland were valued at $2.6 billion.
