Strong flow of investment in web start-ups

This month’s Go4Venture Bulletin starts with pleasant news: The August was an unusually busy month on the financing front. This reflects TMT financial investors trying to capitalise on new investment opportunities (ecommerce, SaaS, cloud, etc) as well as managing their portfolio proactively to show returns to their Limited Partners (LPs). In the end the total invested in August was 60% more than in the same period last year, bringing the total year-to-date financing amounts slightly ahead of last year, for the first time since January.
 
This of course reflects the strong flow of investment (with ever larger rounds) in web plays, with the inevitable bubble building up: for instance this month Delivery Hero, yet another take-away ordering play (which took an €80mn investment from existing investors); and SumUp, yet another mobile-payments on smartphones play (which raised €16mn). It is worth pointing out that these two companies are from Germany, in fact, from Berlin (even if SumUp is technically an Irish holding), the city with 1,300 startups, of which 500 were founded in the last year. For those who were active in tech investing in the late 1990s, this is of course reminiscent of Germany’s then sudden enthusiasm for the Neuer Markt, the local junior stock market, which of course ended up in tears fairly quickly. Hopefully this time around, there will be enough time to create a few winners, leading to the sort of virtuous circles of successful entrepreneurs becoming the next generation of business angels, resulting in a self-sustainable early-stage investment eco-system.
 
Other investments this month look more like reasonable bets in Round C or late-stage companies with a number of €10-15mn rounds, boding well for building substantial companies. What is striking is the increasing diversity of investors at all stages, including US investors making inroads in Europe (Shasta Ventures), new funds (Bright Capital), corporates (ICAP, NTT DOCOMO) and … undisclosed investors. Also worth noting is a new lease of life in debt financing (for instance a convertible bond in the case of CCP) as exemplified by Kreos Capital’s announcement of the first close of Kreos Capital IV, with €120mn of commitments earlier this year.
 
This growing complexity of the European venture landscape is making fund-raising more difficult but also opens new opportunities well beyond the traditional, shrinking circle of established VC funds - provided of course entrepreneurs have the reach and resources to tap these new investors.