Earlier this week, Dealroom released its annual venture capital report (free download), alongside trusted media partner Tech.eu. The report is packed with data and insights. Below are 10 key observations from that report.
Insight #1: With a record € 16.2 billion raised in 2016, European tech is better capitalised than ever
European companies raised € 16.2 billion (US$ 17.3 billion) in venture capital, an increase of 12% versus the previous year and an all-time record. The number of rounds grew by 32%, from 2,566 to 3,376. By comparison, U.S. venture capital funding was down by about 10% from $ 70-80 billion in 2015 to $ 60-70 billion in 2016. All this despite Europe struggling with a bunch of political and economic upheaval (Brexit, deflation, regional unemployment rates of 12-25%).
As a result, European tech companies in aggregate have more capital at their disposal than ever before, to invest in their product and acquire customers. On the one hand, competition for the same customers will heat up even further, but on the other hand much of Europe is still wide open in terms of the online migration “land-grab”.
Insight #2: Slow-down in the UK & Germany, France is now leading Europe by number of rounds
Back in 2014 and 2015, the UK and Germany were the torchbearers of European tech, responsible for more than 50% of all European venture capital raised. But in 2016, that percentage fell to 32%. France, Sweden and Israel took the majority of that lost share, while the rest of Europe also did well.
For the first time, France took the #1 spot in terms of number of deals. Is it time for the French to bring out the champagne? Well, why not but of course, what’s more important is how these new startups will be able to develop in the coming years. But certainly, it is time for U.S. (and other non-European) funds that have been focusing on the UK and Germany, to widen their horizon.
Insight #3: Consumer tech focused more on execution and consolidation in 2016, less on funding
During 2013–2015, a majority of capital went into consumer tech (food delivery, taxis, fashion, home) including well-known UK & German names such as Delivery Hero, Just Eat, Zalando, HelloFresh, Helpling, Home24 home, et cetera. During 2016 these companies focused on execution, consolidation and reaching profitability. This is not a bad thing of course, but the result is a 43% drop in B2C funding in Germany & the UK.
Despite that, over € 7.2 billion (a small increase) was invested in consumer tech in 2016 across Europe. Some top growth categories in consumer tech were: travel, fashion, consumer healthcare, various subscription services and consumer hardware. For 2017, there is plenty of activity to be expected in areas such as consumer banking, Internet of Things, virtual reality, and others.
Another factor explaining the German decline in B2C is that Rocket Internet’s main 2016 funding project was Paris-based Jumia (€ 425 million raised in 2016).
Insight #4: 2016 was the largest ever vintage of European startups
France, Sweden, and many other parts of Europe experienced a surge in number of rounds and total amount raised. Early stage rounds, seed and series-A were key drivers.
France really stood out: the number of seed rounds tripled and early stage rounds doubled, in a nation-wide phenomenon across more than 150 cities. Many French cities saw their first VC round ever in 2016. Several of the most active European investors in 2016 were French (Bpifrance, Kima Ventures, IDInvest,…