Stripe have released the “Blooming Late” report, analysing the state of late-stage technology funding in Europe.
In the first three quarters of 2019 alone, more than 52 deals of €100 million or above have been recorded across Europe, including for Deliveroo (UK), N26 (Germany), Glovo (Spain), Doctolib (France), Klarna (Sweden) and OutSystems (Portugal).
This is already more than 2017 and 2018 combined, and nearly four times as many as in 2016. The data also shows a fourfold increase in total late-stage investment in less than three years: from €3 billion worth of mega funding rounds in 2016 to to €12 billion in the period Q1-Q3 2019.
If the current trend continues, we are likely to see around 70 mega funding rounds in 2019, which would be more late-stage financing deals in a year than in the previous three years combined.
And while the number of mega rounds is growing exponentially, the median size of each deal is staying relatively flat (€147 million in 2015 vs €150 million in Q1-Q3 2019), a sign that investors are massively diversifying their portfolio. In total, 110 companies raised a mega funding round between 2015 and 2019, and only 18 raised more than one in the period. Delivery Hero, Deliveroo, Auto1, OakNorth and N26 were the most demanding scale-ups with 3 mega rounds in the past 4 years.
Germany and the UK are the power engines of the European late-stage tech ecosystem
The figures revealed today show that the UK and Germany are the unchallenged European champions in terms of tech scale-up financing, with just south of €15.3 billion invested in mega funding rounds from 2015 to Q3 2019, which is more than all other countries combined during that time period (€14.7 billion).
Scale-ups based in the UK and Germany are consolidating their advance in 2019 to stay ahead of Israel, Sweden and France, which round out the top five list.
Foreign investors are largely responsible for the surge in funding for European late-stage tech
75% of the money invested in late-stage funding rounds for European tech scale-ups came from outside of Europe (a diverse mix of foreign PE & VC firms, big corporations such as Microsoft and Amazon, hedge funds, state funds, etc).
Of the top 10 investors in mega financing rounds for European tech scale-ups, more than half (6) are headquartered outside of Europe (US, Japan, South Africa, Hong Kong, Singapore and China).
Japan’s SoftBank is responsible for a massive influx of late-stage funding in Europe. Through its Vision Fund, it has pumped nearly €4 billion into European heavy-hitters from 2015 to Q3 2019, while the number two, Insight Venture Partners (US), deployed ‘only’ about €1.4 billion during that time period.
Looking only at Europe-based investors, the UK reigns supreme with 30 firms participating in late-stage funding rounds, compared to 20 France-based, and 17 Germany-based investment firms from 2015 to Q3 2019.
The fintech and software sectors in Europe are driving the late-stage financing surge
An increase of capital flowing to European fintech and software scale-ups was largely to thank for the overall surge in €100 million+ funding deals for European tech companies in the last twelve months.
In total, there were 34 late-stage deals for European fintech scale-ups from 2015 to Q3 2019, but two thirds of them happened in the first three quarters of 2019. In Q1-Q3 2019, there have been nearly five times more late-stage funding rounds for European fintech companies recorded than in the full year 2018.
The software sector is witnessing similar growth, with a jump from only two late-stage European SaaS funding deals in 2018 to a total of eleven in the first three quarters of 2019.
“With strong local talent and both early stage and late stage investment getting stronger year after year, there’s nothing stopping the European tech ecosystem from foster technology giants in the years to come,”
said Guillaume Princen, Head of Continental Europe at Stripe.
“Europe is already the most innovative region for Fintech and we’re now seeing software businesses building for global scale on Day 1. At Stripe, we are keen to help the European ecosystem live up to its potential”.
European companies are staying private longer.
But as more late-stage funding flows to European technology companies, more are opting to remain private and scale independently. Even though we’ve seen high-profile public listings from European tech scale-ups such as Spotify, Delivery Hero, or Farfetch in recent years, the number of IPOs is dropping fast.
While there were 36 European tech IPOs at the peak in 2017, only 21 were recorded in 2018. With only 5 tech IPOs in 2019 recorded so far, the number continues to steadily decline.
The same is true for acquisitions, as an increasing number of European tech scale-ups carves its own path. The data shows that there were 629 acquisitions of European tech companies in 2015, but that number dropped nearly 12% to 555 deals by 2017, and in the first three quarters of 2019 to a mere 273 exits by acquisition.
