‘Mega financing’ for European tech start-ups on the rise in 2019

4 Nov 2019

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A new report looking at late-stage funding of European start-ups in 2019 so far has shown the amount of investment is reaching incredible heights.

Although 2019 isn’t over yet, European tech start-ups have been showered in late-stage funding that far exceeds what has come in the past few years. That’s according to a report published by Tech.eu and Stripe, which has shown that in the first three quarters of 2019, a total of 52 deals of €100m or more have been closed.

This is already more than 2017 and 2018 combined and is nearly four times what was recorded in 2016, the report continued. Some of these biggest success stories of the year so far included for Deliveroo (UK), N26 (Germany), Glovo (Spain), Doctolib (France), Klarna (Sweden) and OutSystems (Portugal).

Push for diversity

Total late-stage investment has jumped fourfold in less than three years, rising from €3bn in 2016 to €12bn in the first three quarters of this year. The report’s authors noted that if trends continue, we are likely to see the closing of 70 rounds of ‘mega funding’ for 2019, more than what has been seen in the previous three years combined.

Despite the huge number of deals being made, the median size of these deals has remained relatively flat at €147m in 2015 versus €150m in 2019 so far. This, the report said, was a sign that investors are massively diversifying their portfolios.

Looking at nations, the biggest winners by some margin in terms of tech scale-up financing were the UK and Germany, with around €15.3bn invested in start-ups in these powerhouses between 2015 and today, which is more than the rest of Europe combined in the same period (€14.7bn).

In the UK, 30 tech start-ups took part in late-stage rounds, followed by 20 in France and 17 in Germany.

Additionally, much of the money flowing into Europe’s start-ups is coming from outside the continent, with 75pc coming from a mix of foreign VC funds and US tech giants such as Microsoft and Amazon. Another major funder of European start-ups is Softbank, which has pumped €4bn into Europe between 2015 and today.

 ‘The writing is on the wall’

Sector-wise, fintech and software continue to reign supreme. In total, there were 34 late-stage deals for European fintech scale-ups from 2015 to the third quarter of 2019, but two-thirds of these happened in the first three quarters of this year. So far in 2019 there have been nearly five times more late-stage funding rounds for European fintech companies recorded than in the full year 2018.

Dealing with such huge amounts of funding, the report also found that many start-ups are deciding to remain private for longer, with the number of IPOs dropping significantly in the past few years. Only five tech IPOs have been recorded in Europe so far this year compared to 21 in 2018 and 36 in 2017. Acquisitions have also declined, falling to 273 in 2019 so far from 629 in 2015.

Robin Wauters, founding editor of Tech.eu and the lead author of the report, said these findings show “the writing is on the wall” for European start-ups in that they no longer need to go public to expand.

“The data clearly shows that the increasing availability of – admittedly, mostly foreign – capital, combined with the ongoing maturation of the fintech, software, medtech and foodtech industries in Germany and the UK, has given rise to an influx of mega financing rounds in European tech – and it’s unlikely to return to previous levels in the future,” he said.

Colm Gorey was a senior journalist with Silicon Republic