European Venture Market: The Bubble Is Growing

The current edition of the Go4Venture Monthly European Venture & Growth Equity Market Bulletin covers the month of April which was another record month. In a way, April was the perfect rainbow showing all the trends of the European market which have been mentioned before in the bulletin:

• Sector – It is all about internet services, and marketplaces in particular: fintech of course, both B2B and B2C (in fact serving SMEs mostly), but also food delivery (yet again), fashion, furniture and car sharing. Only one e-commerce play (with all the logistics hassle). The rest was “software” plays (difficult to draw the border clearly these days) with 3 B2C mobile apps (for mobile payment, banking services and photo sharing), and one B2B enterprise-class treasurey management play.
• Geography – Germany is powering ahead on the back of its 80 million consumer market (5 Large HTI transactions). Followed by the UK (4). With France a distant third (2), just head of Ireland and Luxembourg (one each).
• Stage – The pace of investment is such that many of the internet services darlings are now coming for late-stage (ie. a 4th serving or more). The largest rounds (both mega rounds of more than EUR 100 million) were both in that category. But what is striking is that the activity is all across the board – everybody is rushing to join the party.

Although the velocity of the market seems ferocious to the point of disbelief (can one execute at that speed – really?), some of the numbers for these marketplaces and ecommerce plays are staggering (for instance close to €500 million in sales for Global Fashion Group and already 9,500 staff) which may justify the market enthusiasm.

However the authors of the bulletin comment: “As we’ve been reporting for so many months, the bubble is growing and one by one, the dam’s barriers are breaking. More details below. What is disturbing is that now everybody knows – so we’re getting into this silly period where you’re damned if you do (join in at too high valuations), and you’re damned if you don’t (stop playing).”

As a result oxygen is sucked out from traditional tech investment plays which by comparison look mundane and slow. However after the dust settles, everybody will be back to defensible investments, real IP, disruptive innovation and sensible investment plays. The conclusion of Go4Venture Advisers: “So we like IP rich businesses and investments that don’t require hundreds of $ millions. Call us old fashioned innovation investors. We’ll miss out on the next Uber but we hope that our client and their investors will be here for many years to come.”

The Go4Venture Advisers’ European Venture & Growth Equity Market Monthly Bulletin provides a summary of the most prominent private investment transactions among emerging European TMT companies. Investment activity is measured using Go4Venture’s European Tech Headline Transaction Index (HTI), which is based on the number and value of transactions reported in professional publications. The HTI captures transactions at all stages of investment, from seed to pre-IPO, and is an early indicator of the progression of the private market cycle.

The Bulletin provides analysis of Venture Capital (VC) and Private Equity (PE) financings, including growth equity and financing rounds with single secondaries components (recapitalisations), of a value greater than or equal to our Large Transaction threshold (£5mn / €7.5mn / $10mn). Transactions below the threshold are captured in the HTI, but not profiled in the Bulletin.