Europe – a key investment region that stands apart from others in a number of ways.
On October 14th 2015, KPMG Enterprise in partnership with CB Insights released our Q3-2015 Venture Pulse Report – highlighting venture capital investment activity around the world. In our first blog – Big deals stealing the show in the global venture capital market, we looked at key global trends. Today, I’d like to share insights regarding Europe – a key investment region that stands apart from others in a number of ways.
Europe’s economy has been turbulent over the past few years, but when it comes to VC investment, there’s been a steady increase in activity. In fact, funding reached $3.5 billion in Q3-2015 – a 19 quarter high, and the third consecutive quarter investment topped $3 billion.
While other regions have seen seed stage and angel deals decline in light of a rising investor focus in late-stage mega deals, Europe has been able to buck the trend. Unlike the US and Asia, seed stage funding went up in Europe during Q3, accounting for approximately 40 percent of funding activity during the quarter. This is a significant percentage given the global average is just 28 percent of deals.
The unique early stage ecosystems blossoming in different European countries may be a factor in keeping the percentage of seed stage deals high. Pockets of the region have developed strong startup communities where new entrepreneurial companies can thrive. For example, Israel has a strong R&D based entrepreneurial ecosystem – while Berlin has grown into successful hub for early stage companies. Later in this blog series, we’ll examine what makes both of these jurisdictions unique in the eyes of entrepreneurs.
From an industry perspective, it’s becoming clear that while traditional investment areas continue to be strong, investor focus is starting to shift. During Q3, internet deals reached a five year low in terms of percentage of overall deals. While still the dominant industry for VC investment, the decline suggests that other industries could overtake it in the near future.
Among blossoming industries in Europe, healthcare certainly stands apart. During Q3, healthcare-based VC investment gained a lot of traction in Europe, similar to in other regions of the world. The UK in particular saw a significant amount of healthcare VC activity, with Immunocore being the biggest deal in the space. Over time, we expect VC interest in the healthcare sector in Europe will only continue to grow. Interest will likely be broad-reaching, moving beyond traditional pharma and biotech. Companies focused on medical devices and medical technology aimed at improving the efficiency of the health system may also gain attention.
Beyond healthcare, FinTech investment is also poised for growth. Already, strong FinTech hubs are developing in Berlin, Frankfurt and London. We are seeing a number of organizations in these areas working to disrupt the value chain in banking and insurance – from payments and lending to classical wealth management. Over time, Europe could become the testing ground for companies in the FinTech space.
If you’d like more information on Q3 venture capital activity, please visit our Venture Pulse Report webpage.
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As the Director and Head of the High Growth Technology Group, Patrick has significant experience helping early stage and fast growing technology companies in the UK, many of which are Venture Capital backed. Patrick is also a member of the KPMG Enterprise Global Innovative Startups Network. In this role, he contributes to KPMG’s global initiatives strategy, as it relates to working with the innovation ecosystem, including entrepreneurs and fast growing venture backed companies.
In his previous roles at KPMG, Patrick managed a number of audit engagements of both private and public companies, including working with FTSE 250 clients and several privately-held international companies. Patrick has worked across a range of sectors, with a focus on Technology, Media, and Telecommunications. He has been involved in a number of cross-border assignments, including projects in China, France, Germany, India, Italy, Japan, Russia and the US.