Investment

Private investors and family offices account for 23% of venture funding in Europe, survey

The growing wealth, and expertise, of family offices, have added rocket fuel to the European tech-driven venture capital sector, according to its cheerleader Atomico.

In its 2021 review, it expects a record $103 billion to be invested in European tech ventures in 2021, triple the level achieved three years ago. 

After adjusting for reporting lags, the final sum could be $121 billion. The total value of the ecosystem has surged to $3 trillion, against $2.1 trillion in 2020.

Caught up with further innovation and global euphoria, 75% of survey respondents are bullish. No more than 5% are bearish. 

John Collison co-founder of payments firm Stripe says: “This report confirms what we have been seeing from our customers.  The EU tech ecosystem is on fire.”

Atomico believes tech-driven VC in Europe is gaining strength from the growing experience of corporate founders, plus a surge in investment capital. There is also evidence that entrepreneurs benefiting from liquidity events are reinvesting the money, as is the case in the US.

Surveys by Atomico and Dealroom have charted the rise of wealthy investors, and their family offices.  According to the Atomico survey, private investors, endowments and family offices accounted for 23% of main market fundraisings over the five years to 2020.

Private capital is playing an important role on the European scene, not just in its own right but as “smart money” capable of persuading others to jump on board.

Atomico says the growing experience of founders is also improving the quality of offers. It says founders at 38% of startups can now claim experience in managing other growth companies. 

Wealthy investors can further reinforce fundraisings by agreeing to advise founders. SPAC deals in the US have gained credibility through family offices backing deals to take companies listed. This trend could also spread to Europe.

Atomico’s founding partner, Niklas Zennström, has the right pedigree for this pursuit, as co-founder of Skype and Kazaa. 

Super angels like Seedcamp and Ilkka Paananen, the mobile games developer, played a big role in lifting the notional value of virtual events platform Hopin to the current $7.75 billion, from a standing start two years ago. A new venture called Tulipshare is offering retail investors access to its activist platform, so they can lobby companies over ESG and executive pay. It raised $10.8 million in December after taking care to balance support from VC firms with two angel investors, the co-founders of social app Genly and game studio Voodoo, plus French seed firm Frst.

The largest family investors in Europe include Xavier Niel (Kime Ventures) Oleg Tscheltzoff (Fotolia) Jacques Antoine-Granjon (Veepee) Alex Chesterman (Cazoo) Carlos Blanco (Encomenda Smart Capital); Thibaud Elziere (eFounders); Sherry Coutu (Workfinder); Reshma Sooni (Seedcamp); Sophia Benz (Cherry Ventures) and Saul Klein (LocalGlobe).

Judith Dada, general partner at La Famiglia sees recent developments as healthy: “We live in an age of empowered founders – empowered to choose what investor they want to work with and empowered to control their equity better.” The VC debt market has further broadened their options, she added.

Atomico says European tech has further benefited from new generations of venture capitalists leaving prior employers to set up on their own. 

They include Rodrigo Martinez of HelloWorld; Neil Murray (Nordic Web); Connor Murphy (Bridge); Kiana Mardi (Lucy), Helery Potts (Honey Badger); Nathan Benaich (Air Street Capital); Dec Kelly (Foreword); Andreas Klinger (Remote First Capital); Max Claussen (SystemOne) and Nico Wittenborn (Adjacent). 

According to Atomico, private investors tend to be attracted to emerging VC managers offering access to networks, deals, strategic insight and co-investment.

The pace of sector investment increased through the year to September. Despite Brexit, the UK invested $27 billion in 2021, partly thanks to the maturity of its market, against $12.7 billion in Germany and $8.5 billion in France.

The UK now has 100 unicorns – each worth a notional $1 billion – against 51 in Germany and 31 in France. Munich has more unicorns per capita, totalling 8.1, against London’s 7. But Cambridge tops the league table with a per capita unicorn average of 47.9, against 17.4 in Luxembourg and 12.9 in Oxford. 

Estonia is the country with the most startups on a per capita basis, than Iceland, but investors say the physical location of startups has become less important, post-pandemic.

Exit VC values in Europe totalled $140 billion last year. The US industry is bigger, but Atomico points out that early stage funding in Europe has jumped to 33% of overall inflows, as it continues to play catch up with the US which has fallen to 35% of the total. 

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