European Venture Market 2015: The Sky Is the Limit

Compared to 2013, the Go4Venture’s Headline Transaction Index (HTI) was up more than 40% in value in 2014, reaching an all-time high of €5.4bn - even though the number of transactions recorded was down nearly 15%. The Headline Transactions Index is compiled on a monthly and annual basis as an early indicator of evolutions in the private investments market for European TMT companies. The HTI database covers funding of European companies of at least GBP 1 million.

In 2014 the growing size of fund-raisings was reflected by a record number of Landmark transactions (at least €20mn: 56 – by comparison, the highest number of Landmark transactions reached in the last cycle was 29 in 2008 (approximately half of the 2014 tally).

December was representative of the activity in 2014 as a whole, with five Landmark deals (vs. two in December 2013), led by the mega funding of just over €200mn for Netherlands-based Payment System Provider (PSP) Adyen. Interestingly, all Landmark deals were either Fintech or infrastructure plays (big data or collaboration).

Elsewhere, the news was all about the excitement taking hold of the tech investment market. Notable points include:

• The IPO markets were incredibly active in December (at least in the US). In a month when markets usually quieten down, we instead had a number of notable IPOs – including Hortonworks, Lending Club and New Relic.
• New companies are commonly valued at a multiple over established players, something reminiscent of the 1999-2000 debate over the New vs. Old Economy (the New Economy of course collapsed soon after). The case in point in December was Xiaomi (the Chinese mobile handset maker) raising $1.1bn at a valuation of $45bn, making it the world’s highest-valued technology startup, and 3x as valuable as Hong Kong listed Lenovo (which has a similar share of the Chinese smartphone market).

This euphoria is of course benefitting Europe, making US investors optimistic enough to come to Europe, and encouraging European investors to be bolder – see, for instance, Paris-based Partech experimenting at the seed stage with Partech Shaker and, at the same time, expanding its remit with a new €200mn growth equity fund, whilst building on its Franco-American roots through a presence in San Francisco.

The monthly bulletin of Go4Venture can be downloaded from the Go4Venture website.