Tech.eu and the Nordic Web find that Germany is increasingly dominant in the European tech scene. Will they catch up to London in every category in 2016?
Europe’s slew of startup centers are maturing, led not by London, but by Berlin. That’s the obvious conclusion of the joint annual report by Tech.eu and the Nordic Web published Tuesday in their “European Tech Exits Report 2015.” The report was compiled by Robin Wauters of Tech.eu and Neil Murray of the Nordic Web.
Venture capital grew throughout Europe in 2015, led by the United Kingdom and Germany. There were 594 deals last year vs. 358 the year before. The 2015 deals were cumulatively worth €136.75 billion versus €80.14 billion back in 2014, but those numbers could change with further Q1 announcements of deals made late in the year.
“These countries are also the main beneficiaries of venture capital, which also has a big bearing on the amount of exits an ecosystem sees,” the report states. “Although countries below them may move around in terms of the exits they see, Germany and UK look set to stay at the top for the time being.”
The verticals that led the pack changed mightily year-over-year. In 2014, Enterprise SaaS (66) represented the most deals, while e-commerce (57) jumped from 5th place to 1st in 2015. Adtech (38) fell from 2nd to 4th, while telecom infrastructure broke into the 2nd spot in 2015. Fintech exploded into 3rd place, quadrupling from 11 exits in 2014 to 44.
The location of those exits is by far the most interesting. Germany (119) and the UK (82) were 1 and 2 respectively. Israel (61) moved from 5th place to 3rd, passing France (40) and Spain (38) along the way. But those five ecosystems are easily the strongest in Europe (counting Israel among the Europeans). The next countries on the list were Sweden (37), the Netherlands (31), Belgium (31), Switzerland (27) and Denmark (21). Finland and Ireland had 13 exits each.
Only 4.71% of those exits were IPOs, down percentage-wise from 2014. That supports the notion that tech entrepreneurs are trying to avoid public offerings out of fear that their valuations would implode.
“This is likely due to the uncertainty that remained over the public markets in 2015 with several high-profile European tech companies, notably Deezer and HelloFresh deciding to pull their plans to go public fairly last-minute,” the report said. Late-stage funding is easier to get, also pushing back IPOs. That isn’t stopping a number of startups from considering a 2016 public offering though, including rapidly growing Delivery Hero.
Late in 2015, Geektime compared Berlin to London and found the city was still behind the British capital in a number of ways. But the growth of Berlin is accelerating. Startup Compass ranked the German capital just behind the metropolis on the Thames. The stats collected by Tech.eu and The Nordic Web indicate the city is poised to catch up with London soon.
Domestic investors lead the pack in most countries
While 546 of the exits were acquisitions, 20 were from mergers. An interesting phenomenon was that 13 of those were between companies in the same country. This could indicate that international networks aren’t as solid as they could be across the continent, or perhaps that there are only so many countries whose tech scenes are advanced enough to have multiple mature companies.
The biggest exits were Vimplecom (€21.8B), EE (€17.2B), O2 (€14B), WorldPay (€6.88B) and King Digital Entertainment (€5.49B). but acquisitions only made up 75% of the 20 largest exits. Nine of the top 20 were in the U.K. Demonstrating European startup maturity, 50% of the top acquisitions were by European companies. Five IPOs made over €1 billion (Worldpay, Cellnex, Scout24, Inwit and Sophos). Nearly 60% of all exits were of B2B companies, demonstrating that angle’s staying power.
Several companies made multiple European acquisitions, led by ProSiebenSat.1 with eight and then powerhouse Rocket Internet with seven. Stroer and Vivendo both had six, while Apple and Microsoft each made five. Delivery Hero, itself looking at an IPO, made five buys in 2015. Startups Playtech and BlaBlaCar also bought four companies of their own. Autodesk, Canon, Sony, PayPal, Yahoo!, Tencent, Cisco, Under Armour, Facebook, Twitter, Snapchat and GoPro also bought their own Eurostarts in 2015.
“Delivery Hero, Helpling and BlaBlaCar all made 4 [tech] acquisitions each as consolidation was particularly rife in the on-demand space,” the report stated.
The U.S. (139), Germany (104) and the U.K. (72) were home to the most buyers. While Sweden, Spain and France saw about 60% of its acquisitions made by domestic companies, Americans purchased 50% of Israeli startups, with only a quarter from native Israeli companies. The Brits experienced about 45% made by other Brits and above 20% by Yanks.
What to expect when you’re investing
The report doesn’t examine certain verticals that have grabbed headlines in the second half of 2015 nor in the first month of this year, such as IoT or more specifically, smart and autonomous cars. But Europe reflects the United States in every way, so expect that the biggest corporate investors and startup ecosystem leaders will be full speed ahead on those verticals. That goes double for the industrial and automotive power that is Germany.
The report foresaw that certain industries would lead the pack in 2016.
“We can expect fintech to remain at the top end of the verticals recording the most exits, as well as other well-funded areas such as adtech and cybersecurity.”