As America faces the techpocalypse, how are things going in Europe?
It’s an annual January tradition of tech and finance journalists: Pouring through every pile of venture stats we can find to parse through what happened the previous year and try to divine new micro-currents of where money seems to be flowing.
Pitchbook released its European data this past week, and other reports are trickling out too.
In one sense it’s much the same story we’ve seen elsewhere: The year was a record one, globally, but starting around the second quarter, the number of deals began to decline, while the dollars being invested increased. Then, in the fourth quarter both fell dramatically.
Europe didn’t get the biggest swings of the mega-deal, unicorn wave, compared to the United States and Asia, but that means it also doesn’t have quite so far to fall. It reliably does about $3 billion a quarter. It’s dominated by the UK, although there seemed a blip when Germany was catching up pushed up by a few mega-deals.
When you look at the three major hubs in Europe, the UK is the most solid and stable. Germany has a penchant for Samwer Brother-like deals that pump huge amounts into companies that are similar to those already popular in the US and hope they can expand rapidly around the world. Examples include Delivery Hero and Hello Fresh, two of the biggest funding recipients of the year. Scandinavia is the creativity, design, and gaming powerhouse, but hits from there can be mercurial, fad-driven, and burn bright. Individual hits like Spotify and Supercell can skew an entire market. London, on the other hand, has a healthy mix of enterprise, consumer, healthcare and returns are singles, doubles, triples and home runs.
Of the three, the UK will certainly fare the best in a downturn. It’s the hub of capital and has the longest track record as a startup ecosystem.
But all three markets have something going for it: Increasingly they aren’t nearly as dependent on Silicon Valley money as they used to be. Sure Valley money is coming in and cherry picking the best deals with As, Bs, or Cs and higher prices than locals might pay. But Europe has never been less susceptible to a slow down simply because US money decides to pull back and focus on companies at home.
Throughout these major regions, none of the most active investors were Valley companies, according to Pitchbook. In the UK and Ireland they included Enterprise Ireland [Disclosure: A Pando advertiser, specifically around our European coverage], ICE, MassChallenge, Octopus Investments, and Seedcamp.
In Germany they were High-Tech Grunderfonds, Venture Kick, Rocket Internet, and Holtzbrinck Ventures. And in Scandanavia they were Finnvera Venture Capital, Stockholm Innovation & Growth, Danish Tech Challenge, Tekes, and Northzone Ventures.
Additionally in recent years several new funds have started, frequently pioneered by founders from mainstream global or US-based funds. Three I knew of already. There’s Aleph Ventures in Israel, started by Michael Eisenberg, formerly of Benchmark’s Israeli fund and Eden Shochat, formerly at Genesis Partners. There’s Mosaic Ventures, started by Simon Levene, formerly of Index and Accel’s UK offices, Toby Coppel who previously invested with Virgin, and Mike Chalfen formerly of Apax Partners. And Saul Klein and Robin Klein of Index’s new seed fund Localglobe.
Levene and Klein named a few others in recent conversations:
- Early stage firm Point9 in Berlin
- Multi-stage firm Felix Capital in London
- Seed stage Connect Ventures in London
- Later stage EQT Ventures which is reportedly in the process of starting up in Stockholm
The concern of course is how well these funds will do, and will they keep LP attention amid greater sex appeal and up-and-down swings in Asia and the US. And likely Europe will follow the US and Asia in a broader pullback in investing this year. But as opposed to previous corrections, its local investors who will be making the call.
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