Startups in Europe lag behind the US

Startups in Europe lag behind the US

Europe presents all the necessary elements to allow tech businesses to grow and scale. Startups in Europe have seen a surge in the number of unicorns and the pace at which they are created.  Of the 99 venture-capital-backed European unicorns, 14 were added in 2019 alone. These include Germany’s online bank N26, France’s healthcare scheduling service Doctolib, and Lithuania’s online used-clothing marketplace Vinted. However, European start-ups still lag in achieving successful late-stage outcomes when compared with other start-up ecosystems.

PitchBook’s European Venture Report Q1 2020 states VCs poured an impressive €8.2 billion into European companies during the first quarter of 2020. The report states that COVID-19 could threaten the flow of US capital into startups in Europe. European startups brought in a total of €8.58 billion across 40 deals of €100 million or more in 2019. The number of VC-backed transactions, however, has been on the decline—sliding from 5,929 deals in 2018 to 5,017 last year—showing that the ever-increasing pool of money is being distributed across fewer transactions.

Attracting and retaining talent is indeed challenging — both for companies in Europe and elsewhere — but hiring is typically cheaper outside the US. This, of course, is a double-edged sword in that European tech is at risk of brain drain — the mass exodus of talented, and experienced, individuals seeking higher salaries on the other side of the Atlantic. Even though European tech has overcome challenges before the pandemic, there’s very little doubt that it still lags behind the US and parts of Asia.

European Unicorns Analysis

While Europe generates 36 per cent of all formally funded start-ups, it creates only 14 per cent of the world’s unicorns. Adjusted for population and GDP, the number of seed-stage start-ups that Europe generates is only 40 per cent of that generated by the United States, reports McKinsey.

Europe’s ecosystem has been less effective than that of the United States at turning start-ups into late-stage successes.

To analyze the steps between the seed stage and success, McKinsey looks at start-ups that received seed or angel funding between 2009 and 2014. For example, European start-ups were 30 per cent less likely to progress from seed to a successful outcome, as compared to start-ups that raised seed funding during that time in the United States.

The analysis also showed that most European unicorns have had to expand not just beyond their individual countries but beyond Europe as well, whereas only half of US unicorns have expanded outside the continental United States. That said, European start-ups have to focus on wider internationalization earlier in their journey than do US start-ups.

There is also a cultural difference taken into the account as the reason why European startups should perform faster in early stage than the US startups. Cultural differences and language barriers keep Europe behind the US startups that grow on a much faster pace. However, an increasing number of recent European success stories, such as Delivery Hero, Auto1, or N26, that focused on hypergrowth at the expense of short-term profitability, has shifted cultural differences.

Meanwhile, the startup ecosystem in Southeast Europe (SEE) has startups, supporting institutions, interesting technology, and founders with an ambitious mindset. Globally successful companies can be created even in this part of Europe. That being said, unicorns potential exists in South East Europe as well. Outfit7, a family-entertainment company with Slovenian founders and pioneer in the field of digital entertainment, has been sold for 1 billion USD to a Chinese investor in January, thus becoming the first unicorn in the region.

Overcoming challenges

Europe could look at how to support the culture and capital needed to further grow its start-up ecosystem. Entrepreneurs could take advantage of the improving conditions for startups in Europe and aim for global leadership. Governments could further this through more risk-willing capital, and considering allocating more semi-public funds toward growing the ecosystem, as well as fostering collaboration between ventures, academia, and industry.

Women in Venture Capital in 2020

Women in Venture Capital in 2020

In 2019 there was not only funding to female-founded companies and new female-founded unicorns, but also women in venture capital. Moreover, according to a recent article by Fortune, the number of venture capital firms with two or more female partners doubled last year to 14%. That suggests a cultural change is underway in one of finance’s most intractable all-boys’ clubs. In 2019 52 women became VC partners or general partners for the first time.

The number of firms with zero women as partners is still a majority. At the end of 2018, 85% of firms did not have a single female partner. At the end of 2019, that number was 65%.

Several of the industry’s top firms have now added two or more women to their leadership teams. Sequoia Capital, Lightspeed Venture Partners and Andreessen Horowitz all have multiple female partners.

The venture capital industry has met with both cultural and economic pressure to consider gender diversity. Morgan Stanley recently estimated that venture firms that fail to invest in women and other underrepresented minorities risk losing out on as much as $4 trillion.

Still, some minority groups remain woefully underrepresented in venture capital and have made few gains in recent years. Let’s dive in and put those numbers into context. All Raise has been tracking VC partner additions by gender since 2017. We will outline in this article data by All Raise studies with the focus on women in venture capital.

Source: All Raise, according to Pitchbook

In 2018 more than $46 billion was funnelled into female-founded startups, more than doubling 2017’s value. For perspective, only $3 billion went to female-founded startups in 2010, translating into a more than 15-fold increase over the past decade.

With the record number of new female partners and general partners last year, that percentage has improved to 13% as of February 2020, according to PitchBook. 

Female-founded startups are exiting at an increasing pace. 2018 saw $26 billion in total sales (through acquisitions or IPOs) for female-founded startups. Female-founded startups take substantially less time to exit than the broader market, a rarely noted trend that indicates a key metric of success.

Future of VC is, without a doubt, more women, more people of diverse backgrounds, and allies working together to identify and fund startups.

 

Tech VC deal activity

 

While female-founded tech startups make up nearly 20% of all VC-backed tech companies, they bring in a lower percentage of all tech investment dollars (12.2% in 2019 YTD). Female founded startups are an increasing part of that story, rising from 10% of the VC-backed market in 2009 to 19% by 2018.

More importantly, the sheer number of female-founded, VC-backed tech startups has grown significantly, from 410 companies in 2009 to over 2,700 last year.

Moving forward, tech ecosystem with female entrepreneurs in the thousands (instead of in the hundreds) bodes well for the industry going forward.

 

Female Investors

 

Assessing startup founders and their ideas come with more risk than model-based sectors such as trading, investment banking and PE. One major barrier to female founders raising VC is a persistent lack of female decision-makers at VC firms. As of August 2019, about 12% of venture firms and angel groups in the US had women in decision-making roles at the investment level.

How to raise venture capital for a tech startup

How to raise venture capital for a tech startup

There are several ways to fund your business, but raising venture capital for a tech startup is one of the best ways to accelerate growth and gain industry guidance. According to CB Insights, “nearly 67% of startups stall at some point in the VC process and fail to exit or raise follow-on funding.”

That said, raising capital can be a major challenge and can take up to six months to secure, and even longer to be notified of a rejection. We outlined in this article important steps to take when your business is looking to raise venture capital for a tech startup.

 

Identify your needs

 

The majority of businesses only raise venture capital after having traction. Let’s say the word traction in business refers to a startup’s way of breaking the path to progress into measurable growth. And that can come through customers, financially, or through a diverse sort of proven momentum in a startup’s market relation.

Start by creating a detailed business plan, to know how much investments your business will need and why. To identify your business goals, use the SMART method, and ensure they’re practical.

As you create your business plan, you’ll be able to fill in the gaps regarding your business goals, target market, target audience, competitive landscape, product definitions, and financial projections. These are all crucial aspects that investors look for when analyzing your pitch and deciding your potential success rate.

 

Search online to locate potential investors

 

Once you have a better idea of what your business stands for and how to make it profitable, it’s time to research potential investors. With detailed research, you will have a good idea of who’s looking to invest, what they’re interested in investing in, what pitches they typically hear, and so on.

 Think like an investor and make the deal attractive to the investor.

Put yourself in the investor’s shoes, consider what you have to offer, and ask yourself if you would invest in your own business. Several great resources can help you find more information about active investors globally and locally.

Crunchbase: A source for investors and investees on a global scale, filter by location, industry, number of employees, total funding amount, and last funding date. Furthermore, Investor Hunt‘s paid version with a database of over 40,000 investors and 200,000 data points that will allow you to procure their email addresses. British Venture Capital Association (BVCA) also provides a directory of venture capital firms operating in the UK.

Besides online investor databases, you can also do a quick google search to get you started.

 

Networking

 

Forming relationships with venture capital investors, angels and industry peers will help you gain insight into who is looking to invest right now and who isn’t. Besides investment opportunities, networking helps you form a community of like-minded entrepreneurs. So, where can you meet these investors and peers to form and build these relationships?

TechHub, the global community for tech entrepreneurs & startups, run over 1000 events per year that help entrepreneurs make new connections with peers and investors alike. SuperReturn International is a perfect place to meet senior LPs and GPs while working with local regulators and venue and event partners to give you safe and secure networking and learning opportunity. Startup Day is the place for startuppers, investors, executives, world-class experts, and media to meet. There are many more events and networking opportunities taking place online that you can join.

 

Hire an advisor for expert insights

 

If you feel you need more help after networking or searching on your own, an advisor can offer you advice on where to look for capital and how to structure your pitch. Advisors can also introduce you to their network of VCs and angel investors who may be interested in hearing your idea.

It is also important that you develop the skills necessary to prepare for your pitch and appear confident in your pitch and ongoing negotiations.

In general, advisors can help you negotiate the terms of your deal, which is extremely important if you’re raising capital for the first time. Perform due diligence to improve the terms and conditions of your deal, and prepare a business plan, pitch, and term sheet.

 

Create a winning pitch deck

 

Stories help the listener place themselves in the shoes of the people you are targeting. As an example, the Airbnb pitch used to be “Book rooms with locals, rather than hotels”. The pitch should share the value proposition and vision. Your pitch needs to tell the story and explain the problem you’re trying to solve. Be specific with numbers and use your market research here to explain the target audience and market size. 

Raising venture capital for a tech startup can be just what you need to launch your business into the market and achieve your goals and dreams. Take the time to prepare, network, seek advice, and craft the perfect pitch to give yourself the best shot at success.

CEE startups ecosystem – tech scene

CEE startups ecosystem – tech scene

The CEE region continues to evolve and compete to be at the forefront of the European tech startup scene. Moreover, CEE startups produced over 10 unicorns with a combined value of €30 billion. There’s been a drastic change in the region. That goes for the majority of early-stage startups 5 years ago to companies raising sizable Series A + rounds with international VCs backing them.

Private equity investment in CEE reached €2.7 billion in 2018 to local talents, according to the Invest Europe Association. Furthermore, venture capital investment rose year-on-year by 32% to €160 million. By a number of companies backed in 2018, venture capital registered its second-best year on record.

In recent years, CEE startups in tech-led to huge traction of the market to venture capitals. About 10,000 emerging Eastern European businesses raise their first rounds of funding in the last five years. In the same period, the CEE market has seen more than ten unicorns emerged, with a total valuation of €30 billion.

CEE startups examples in tech

Lots of CEE startups tech companies achieved admirable results in tech space with a huge impact on a global scale. Grammarly Inc. is one of such tech company, founded in Ukraine. The company develops a digital writing tool using natural language processing (NLP) and artificial intelligence for effective writing of the English language. With more than 20 million active daily users, in 2019, the company was able to raise $90 million with a valuation of $1 billion.

We have Russia’s Miro, a digital whiteboard designed to allow distributed teams to work effectively together. The company raised a $50m Series B in April and has five million users worldwide. 

Another example is a Lithuanian company, MailerLite that offers advanced automated email marketing campaigns. The company was recognized by SaaS Magazine as the 5th fastest growing SaaS business in the world.

DocPlanner, an emerging Warsaw-based online healthcare platform, is making it effortless for patients to book appointments with the right doctor. In May 2019, it announced raising an amount of $89.8 million series E funding in less than two years after it raised $16.8 million in venture capital.

Warsaw and Tallinn are currently leading the space as the largest tech hub in the CEE region by impressive numbers in venture rounds.

Poland startup ecosystem

Poland is the largest economy with 30% share of total GDP ($1.59T) in the CEE region. That said, polish technology companies are becoming more sophisticated and many have truly global potential.

Source: Dealroom.co

By invested venture capital, Poland ranks as a second-best in the CEE region. 2019 was record-breaking in terms of the amount of capital invested. As many as 269 transactions totalled over PLN 1.2 billion.

Although the pandemic situation has been trying to thwart our plans, we do believe that 2020 will have also ended with record-breaking results.

– said Eliza Kruczkowska &Maciej Ćwikiewicz from Polish Development Fund Group (PFR)

However, the Polish tech startups are facing some challenges. Many great
ideas lie dormant in the universities’ drawers and laboratories. That may be solved with market professionalisation. That said, mature managers with a good track record will be able to find good projects and convince the originators that together they can achieve success.

One of the key challenges is a clear equity financing gap for later and growth-stage companies who are raising B or C rounds. Additionally, the Polish tech companies should improve managerial capabilities in the area of international business.

Key takeaways

What should we expect from the CEE region in the future? The diversified workforce has great potential. Moreover, the region includes about one million developers (50% in Poland, Romania and the Czech Republic), offering highly-skilled and educated tech workers. As mentioned in the article, Poland in 2019 is having the breaking record in venture capital investments. CEE startups certainly don’t lack innovation and highly-skilled and educated tech workers. Finally, the CEE region will likely gain more attention from investors outside of Europe.

Fundraising during the time of crisis

Fundraising during the time of crisis

The economy is in the bad shape and the things may only get worse. Fundraising during the times of crisis can be challenging and fundraisers will look for ways to respond to the crisis.

We have to accept that the world has changed as we know it. We need to adapt to the new normal. For starters, rather than panicking, you should consider a rational way to respond to the crisis.

 

Technology as a turning point

 

You are probably working from home and adapting to the new way of working. The first thing you should accept is technology. Try to get comfortable with technology and use it for your advantage. 

Start fundraising over the phone and organize a video meeting. Now is the time to put in place online communications channels and marketing.

Connect with donors. Facilitate direct contact from the people in your organization that have influence with donors. Their influence comes from the positions they hold and the fact that they are not paid to raise money. That means, above all others, leadership volunteers and Chief Executive Officers.

The perfect time to have a call is now during the crisis. You want to make sure your donors are doing alright and you want to show concern and appreciation.

 

Be attentive to your donors

 

There are lots of ways you can cut the costs of fundraising. For example, you can stop prospecting for new donors and telemarketing efforts. You can also try to eliminate thank yous to donors.

However, you have to keep fundraising. Whatever the economic condition, business goes on. You can’t treat loyal and responsive donors like statistics. And you can’t stop building your donor database.

The only defensible, businesslike way to respond to an economic crisis is to recognize that fundraising requires both continuing investment and ongoing care.

Don’t stop talking to your donors, just because the world is shaken. Past experience shows some donors never forgive the charities that don’t reach out in times of need. In the article at Philanthropy, people who work in fundraising, technology and other businesses have shared their stories.

 

Consider fundraising online

 

Online fundraising does not represent salvation during the time of crisis and yet billions of dollars have been raised online. Fundraising online has multiple benefits for nonprofit fundraisers, most of them having little to do with money.

It could attract younger supporters, and reinforce appeals sent through the other channel. Enhanced investment in online communications will pay many dividends, reinforcing near-term fundraising efforts and laying the foundation for a more prosperous future.

You can organize a virtual event and have peer to peer fundraising campaigns.

The nonprofit reaches out to loyal supporters and asks them if they want to participate in the fundraiser. If supporters are willing to participate, they then set up their own online fundraising pages (with the nonprofit’s help). These individual pages link up to the nonprofit’s main peer-to-peer fundraising page. There are also plenty of other ideas on how to launch online fundraising.

The key takeaway of this article is to stay persistent in your fundraising and don’t forget about your donors. Have a meaningful conversation with them and express your concern about the current situation. Your donors will appreciate you more and remember you in the future.

Digital disruption impact on business in the new era

Digital disruption impact on business in the new era

We live in disruptive times. Digital disruption impact on business will face uncertainty. Technology has changed the way we work, shop, sell, our economy, day to day factors such as transportation, right down to the way we live in society. With the new era, comes a new disruptive technology that will change the way we live or how we think.

A wave of innovation disruption is happening faster with companies going out of business faster.

Especially, now that we have all different technologies suddenly converging – IoT, robotics, self-driving cars, AI, Big Data and analytics, 3D printers, nanotech, AR, VR, quantum computing, bioengineering and blockchains. The immediate impact of blockchain technology may not be apparent for the non-technological eye; however, it could improve existing systems within society at large.

This digital disruption impact on business is, therefore, changing lives on many fronts. It is changing the value propositions for a business.

Moreover, a common example is an e-commerce as a digital transformation in business. Disruption in commerce means a radical break from the existing processes in the industry. A recent study by Accenture showed that industry leaders expect up to 40 per cent of incumbent businesses to be displaced by digital disruption by 2020.

The global financial sector could be worth US$26.5 trillion in 2022 with a CAGR of 6%. There are still financial institutions that do not have an app or a website to meet today’s market demand. Therefore, the businesses that put customers first, are those that win the prospects.

What are the most disruptive technologies or trends between now and 2022?

 

The answer found at Quora, by Thomas Kutschi,  VP Alliances at Infonova, a leading-edge BSS vendor.

To change the world within the next 1-5 years the technology has to be mature already and in the early adopters’ phase. This limits it to a few “un-revolutionary” technologies. A few that come to my mind:

Distance education: education is still seen as an on-premises activity. This will largely change. The technology is there, providers of education are ramping up their efforts to tackle this market and users start to adopt it.

E-Commerce: A significant part of purchases are already made via the web, but this is going to increase and conquer a new customer segment.

Non-linear media consumption: linear TV is still king in the living rooms of today (and it is there for good, just less important) – but non-linear VoD, Time-Shift etc. will be widespread with availability of broadband.

Home automation: This might probably take longer. Moreover, five years from now it will be normal to live in a fully “automated” and remote-controlled living environment.

Big data: We are currently only talking about this, but the impact will be there five years from now. That said, big data will evolve with tailored solutions, mass-customization, personalised offers and ads.

Internet of things: More and more sensors or actors will be internet-connected.

Cashless payment. Either via plastic, NFC, mobile, whatever – we will see less cash circulation 5 years from now.

Recycling: A lot of very expensive and valuable material goes to waste. Garbage is put into a hole in the ground or burned. New technologies for separation of garbage and re-winning material out of it will hit the street and make your garbage a big business.

Digital disruption impact on business

Business meetings shifted to video conference. Digital technologies are in use in the day-to-day of every company. In addition to that, businesses who have trouble switching to digital communication are rare.

Moreover, the sudden switch to technology and digital communication affects companies at all levels. Changes the channels of communication with customers and suppliers. And even the tastes and dynamics of the market change in a profound and surprising way.

A real case study example of disruptive technology transformation is a company WW (formerly Weight Watchers).

According to Which 50; In response to COVID-19, the company moved 30,000 face-to-face meetings — impacting a third of the company’s members and the bedrock of its business — into the digital realm. A month later, high satisfaction ratings from its customers demonstrate the success of the venture.

There are many examples of companies who adapted the new change quickly without any difficulties. Online meetings performed easily through the video calls with the app we already know such as Zoom or Microsoft Teams. Online payments are also possible through e-commerce and communication between teams through Slack channel, popular in the tech community.

In summary, the digital disruption impact on business already resulted in a sudden change in the way we do business. How we communicate with our partners or customers. It also changed the way students learn in schools and are prepared for the new era of digitalization. Meanwhile, Fintech companies offering short-term financing to cash-strapped businesses are slammed with online enquiries for help.