Revolut and SumUp are the only two confirmed profitable companies among the 10 most valuable unicorn startups in Europe according to Pitchbook. In total, there are about 140 unicorn startups in Europe in terms of euros. Most of them became unicorns because they chose a hypergrowth strategy. As a result, most of them are operating at a loss. There are only two exceptions in the top 10. The first one is the British Revolut, which announced EBITDA of £45 million ($54 million) in Q4 2023. The second is mobile payment company SumUp, which reported a pre-tax profit of £1.2 million ($1.5 million) in its 2022 declaration.
Carta specialists analyzed all the facts of attracting investments that were formalized with the help of SAFE or convertible bonds. We are talking about investments that took place before any significant venture rounds. That is, the sample includes both pre-seed and later seed. According to Carta, in 2023, 34.6% of all pre-seed funding rounds went to Bay Area companies. However, the picture changes slightly if we look at the deals themselves and their number rather than the capital. Small angel rounds of less than $1 million have become much more dispersed across the US geography.
The value of unicorn startups in the cybersecurity and artificial intelligence sectors grew by 24.4% and 22.9%, respectively, last year. This is evidenced by the Morningstar Pitchbook Global Unicorn Vertical Indexes. Almost half of the new unicorns (44%) belonged to the artificial intelligence and machine learning sector. The pace of unicorn creation dropped almost threefold over the year, but the cumulative value of all unicorns backed by venture capital funds increased by 12.77%. There is a simple explanation for the growth in the value of unicorns in the two industries: a few companies set the tone for the entire sector. For example, the growth in the valuation of unicorn startups in the cybersecurity sector can be explained by the fact that Wiz is close to a $10 billion valuation. The artificial intelligence sector received a rising tide that lifted all boats, thanks to Microsoft’s investment in OpenAI ($10 billion) and […]
Carta has published another interesting report on the distribution of investor interest depending on the stage of startup financing. The starting point was 2021, after which the increase or decrease in investor interest was analyzed. The graph clearly shows two trends. SAFE and Convertible note are becoming an attractive form of investment, particularly for new investors. It is fast and cheap – low entry barrier.
Last year, 95 startups from around the world received a valuation of more than $1 billion. This is the lowest number since 2016. Most of the new unicorns – 20 of them – specialize in artificial intelligence. Fintech, cleantech, and energy accounted for 14, 12, and 9 startups respectively. Geographically, there is a significant advantage of American companies – 41 of the new unicorns were from there. 24 companies are from China, and three each are from India and the UK. Today, there are more than 1,500 unicorn startups in the world with a collective valuation of more than $5 trillion. In total, they have already raised more than $900 billion from investors.
In Q4 2023, the income distributed by US venture capital funds to LPs fell to its lowest level in 14 years. The peak value was 32% in Q2 2022. Since then, the average distribution of US venture capital funds has been declining every quarter. The exception was a slight increase in Q1 2023. The main reason for the drop in yields is the lack of exit options. This directly affects the balance of funds that can be reinvested in other venture funds. With such results, LPs are less inclined to invest in new structures and venture capital companies with a poor history of profitability. Preference is given to funds with high DPI and a long history. The increase in the number of IPOs projected for 2024 should help improve the situation.
According to Pitchbook, at the end of 2023, American venture capital companies had $311 billion in dry powder. The capital of the so-called “dry powder” reached a record level. American venture capital firms were able to spend only half of the $435 billion raised from investors between 2020 and 2022. Investors are in no hurry to spend money given the current economic climate. The main reason is that you shouldn’t invest if you can’t make money on it. Last year, investors were able to distribute only $21 billion to LPs. As a result, there is growing pressure from investors to either waive management fees or return some of their capital. Sequoia Capital has already begun to waive fees for unused capital. Some investors, including Lightspeed, are transferring portions of their portfolios to a new continuation fund, from which LPs can withdraw at any time.
According to Pitchbook, US investors participated in 1,863 European deals in 2023. The activity decreased by 40% over the year. In 2022, U.S. VCs financed 23% of the total number of deals in the region. At the same time, despite the decline, the level of participation remained the third highest in the last decade. US investors are increasing their participation significantly each year, up from 11% in 2013. The main reason is the overall growth of the European startup market. American investors are likely to focus on their core domestic markets. But there are those who are increasing their presence. IVP and Andreessen Horowitz are opening offices in Europe. In addition, last October, General Catalyst acquired La Famiglia, a German early-stage venture capital firm.
Kruze Consulting has found through a survey that investors have begun to pay more attention to revenue performance. Startups that received Series A funding in 2023 showed four times more revenue growth than those that failed. Investors want to see Series A startups that are not only growing rapidly, but are also efficient in terms of capital utilization. While revenue growth is important, investors believe that gross profit margin is much more important, as several seed startups with impressive revenues have failed to raise funding in Series A rounds. Around 90% of seed-stage startups that raised subsequent Series A rounds had gross margins of more than 50%. On average, the most successful companies that passed Series A had gross margins of 80%. Startups that successfully raised Series A rounds had an average loss ratio of 3 times. Startups that failed had a 10x multiple.
Acquisitions of venture capital-funded startups hit an eight-year low in 2023 as strategic buyers and private equity firms decided to hold off on spending, expecting startup valuations to decline further. Only 1,738 venture-backed startups were acquired globally in 2023, the lowest number since 2015 and a 31% decline from 2022. In the U.S., the number of deals also fell to a ten-year low, with 824 deals in 2023, down 30% from the previous year. Large deals were rare, but some significant deals still took place, including the $4.9 billion acquisition of Scopely by Savvy Games Group. Expectations for 2024 vary, but many are hoping for a revival in deal activity, especially in the cybersecurity, cryptocurrency, semiconductor, and artificial intelligence sectors.
Another report reveals the difficulties startups faced in attracting investment in 2023. This time, the Carta service has revealed the down-rounds figures. A down round is an investment round in which the company’s valuation decreases compared to the previous one. That is, companies are forced to raise funds on deteriorated terms, but these are the realities of the market: take the money or die. The chart shows that companies at later stages of development have been disproportionately affected by this trend. As a rule, their valuation has fallen by a larger percentage. Experts disagree on how to interpret the drop in company valuations. Some see it as a market problem, while others see it as a path to recovery. Carta is inclined to the second opinion.
In 2023, the European technology landscape faced a significant reality check, as evidenced by data published by Sifted. Funding for European startups throughout 2023, up to December 5, experienced a notable 42% decline when compared to the previous year, 2022. The most substantial decline was observed in Series C and beyond funding rounds, where the total funds raised were reduced by half, marking a decrease from $61.4 billion in 2022 to $30 billion in 2023. Across all European countries monitored by Sifted, there was a consistent decrease in the total funding amount when compared to the previous year, with the exception of Denmark, which managed to match the €1.4 billion it raised in the preceding year.
The Crunchbase article, “Lower Valuations, Higher Bar: What It’s Like To Raise A Seed Round In 2024,” discusses the current state of seed-stage startup investing. Main ideas:Aftereffects of 2021’s Boom: In 2021, startups raising seed funding faced a more forgiving environment with higher valuations. However, the scenario has since shifted, leading to lower valuations and stricter criteria for funding. This change was influenced by the previous year’s overvaluation and the need for startups to prove their worth more convincingly to attract investors. Changing Dynamics in Seed Funding: Despite the lower valuations, seed funding hasn’t seen a significant drop from its peak. The bar for securing seed funding has risen, especially for first-time founders, who now need substantial traction to raise funds. The trend shows a shift towards larger seed rounds, with fewer but more sizeable deals being the norm. Implications for Future Funding: The seed stage has become a more […]
US seed funding has remained strong despite a decline in startup investments worldwide. This is promising for the future in 2024. US seed funding increased by almost 10% in 2022, but then dropped by 31% in 2023. However, it still remained more stable than funding at other stages. This downturn, while significant, was less severe compared to the broader investment landscape, with seed funding still above pre-pandemic levels. Investors are positive about the growing startup environment, with lower company values and more skilled workers, which could benefit early-stage companies in the future. In the last ten years, seed funding in the US has increased significantly, reaching a peak of over $16 billion in 2022 before dropping to $11.5 billion in 2023, which is still higher than the investment levels of 2019 and 2020. The current market dynamics have led to more selective investment practices at the seed stage, with a […]
Web3 startup investments dropped by 74% in 2023, totaling less than $7 billion from 1,564 deals (Crunchbase). This is a significant decrease compared to the previous year, which saw $26.6 billion invested across 2,891 deals. This is the lowest level of investment since 2020, marking a sharp decline in investor interest in the sector. In the fourth quarter of 2023, only $1.1 billion was raised in 221 deals, down 21% from the third quarter and 65% from the same period in 2022. During the year, only eight Web3 startups were able to raise $100 million or more in funding, a significant drop from 118 such rounds in 2022. Bitcoin has recovered significantly and regulatory developments, like the SEC’s approval of spot bitcoin ETFs from 11 companies, suggest a potential return of interest in the sector, despite the overall downturn. However, investor interest is shifting to AI, leaving Web3 facing the […]
In 2023, VCs invested $2.9 billion in Latin American startups. Crunchbase calculated the funds and tried to determine the reasons for the negative trend. The above amount means that venture capital funding in the region has fallen by 63% compared to 2022. The drop of 84% compared to the record-breaking figures of 2021 is even more impressive. Latin America has been experiencing the fastest decline in venture capital funding for two years in a row. Crunchbase’s experts think that the negative trend is not only due to regional specifics and political conditions. There are multiple reasons for it. The problems are primarily economic. This is a multiplier for the global decline in venture capital funding. Brazilian startups are doing better than others in the region. Lending provider QI Tech raised $200 million in Series B, and online real estate platform Loft received $100 million in new funding. Despite the overall […]
One of the signs of the next “venture winter” is a drop in valuations of companies that are attracting investment. Carta has analyzed the clients of its service over the past three years. In 2021, a study revealed that the median valuation of a new Series D company was over $800 million, making it very close to achieving unicorn status. In 2023, the average company at the same stage was valued at $222 million. The decline is also visible at other stages, but the percentage difference is very different. Compared to 2021, Series A valuations are down 8%. Series D valuations are down 73%. Carta experts believe that in 2024, we should not expect a rapid return of valuations. Interestingly, they call it a return to “full health”. Or maybe it’s the current valuations that are healthy?
In a significant shift within the venture capital landscape, 2023 has marked the longest fundraising period for venture firms in over a decade. According to recent data from Pitchbook, the median time required to close funds has expanded to 15 months, a stark contrast to the previous year’s decade-low average of 9.3 months. This notable increase, representing a 46% surge from 2022, signals a shift in the investment climate. The change is primarily attributed to a more cautious approach from limited partners (LPs), who have pulled back their investments in response to multiple economic stressors. Key factors include a decline in technology stock prices, rising interest rates, and a noticeable reduction in initial public offerings (IPOs). The current economic environment has prompted fund managers to adopt new strategies to attract LPs. These strategies include offering more favorable terms, such as side letters and co-investing rights. However, the fundraising landscape is […]
Crunchbase continues to summarize the results of the past venture capital year. it’s time to identify the most active investors. Andreessen Horowitz took part in 79 venture capital deals and became the first. Lightspeed Venture Partners and Bpifrance took second and third place in the list with 57 and 55 deals respectively. A16z also ranked second in the ranking of the most active investors leading or co-leading deals. Microsoft became the leader thanks to its $10 billion investment in OpenAI and $1.3 billion in chatbot startup Inflection AI. Interestingly, A16z’s leadership came despite the fact that they closed 43% fewer deals compared to 2022. This trend is even more pronounced given the fact that last year’s leaders – Tiger Global Management, SoftBank Vision Fund, and Sequoia Capital – are not on the 2023 list. Among Seed stage investors, the leaders have not changed: Techstars, Y Combinator, and Antler. Source: https://news.crunchbase.com/venture/active-investor-ranks-a16z-lightspeed-eoy-2023/
In recent years, DocSend has become one of the recognized standards in communication between startups and investors. Entrepreneurs use it to share presentations of their companies, tracking interest statistics. DocSend regularly releases reports that use general data without disclosing company names. This allows you to see trends that characterize communication between the parties. The company has just released another report describing the state of affairs in 2023. The 26-slide presentation with the report can be found here: DocSend report. We will share a few interesting slides from it. Less engagement vs. More pitch decks?! Team + Problem + Market size Show me your money! More contacts. Less meetings. Is winter coming?
Source Inspiration: Rick Zullo, Co-Founder & GP at Equal Ventures In the venture capital realm, a transformative shift is occurring: Seed rounds are increasingly becoming the new Series A. This evolution, insightfully highlighted by Rick Zullo of Equal Ventures, reflects a broader trend in early-stage investing. Historically, Series A rounds, often in the multimillion-dollar range, were the first significant institutional investments in startups. However, as the costs of launching companies have decreased, startups have been able to make substantial progress with just angel investments – traditionally the domain of friends, family, and enthusiasts. This shift has elevated the appeal and professionalism of angel and seed investing. The success of early seed investors has led to their growth and maturity. Limited Partners (LPs), eager for returns, are now allocating more funds to these investors, escalating the typical seed investment amounts. Consequently, what used to be modest $100k checks have grown to […]
When we first started collecting our database, Unicorn Nest has used multiple source to collect a biggest database of investors with 40,000+ entities. These are all investors who have made at least one startup investment in the last 15 years. When we were perfecting our scoring algorithm, we realized that a lot of data is hidden from view. New Datapoints Red flags Scoring algorithm
In an unexpected twist in the tech world, funding for AI startups is skyrocketing across Europe, a region traditionally not known as a hotbed for AI innovation. This surge is headlined by the French generative AI startup, Mistral AI, which recently secured a staggering $487 million in funding. This investment round, spearheaded by the renowned Andreessen Horowitz, catapulted Mistral AI’s valuation to an impressive $2 billion, placing it firmly at the top of Europe’s AI startup scene. This funding frenzy isn’t isolated to Mistral AI. To date, 16 other European AI companies have collectively hauled in over $1 billion, signaling a robust interest in AI technologies across the continent. Notably, Synthesia, another major player in this burgeoning field, has clinched the second spot on Crunchbase’s list of most-funded European AI startups. Following a $90 million Series C funding round led by Accel, Synthesia achieved unicorn status in June, further emphasizing […]
Every startup wants to accelerate its path to success. Using other services is usually a way of saving time on tasks you are not great at while focusing on your core expertise. In this post we accumulated different services startups might need during their journey, according to the jobs to be done framework, what job are you looking to fulfill. We have examined the startups by sector, and we have divided them into the following categories: Analytics, Design, Customer Support, Project/Product Management and others. We will gradually be adding more categories, so do add this page to your bookmarks. If you have any suggestions about tools we need to add to this list, drop us a line at [email protected] with a subject line “Unicorn Startup Toolkit”. Analytics Mixpanel Mixpanel is a product analytics platform that helps you track how users interact with your product. It gives real-time data on where your users are […]
At Unicorn Nest, we do a lot of researches on the fundraising market on an ongoing basis. A significant part of them is aimed at the European deals, due to our strong Benelux expertise. In this post, I want to focus on industries, the number of European series A rounds of which has been growing most actively in recent years. By the way, if you are planning to raise Round A, there is something useful at the end of the article. Rocking industries We have analyzed 940 European investment rounds from 2016. To make the data easy to read, we aggregated 1000+ known industries to a list of 45. The most promising 7 of them will be discussed below: Civil Engineering, Content, Electronics, Gaming, Health Care, Insurance, Virtual Currency. Most of them grew unstably and slowly, and no industry had any super bursts. We took the average annual growth for […]
From today on, we have a new policy in our company. It is about the right to make mistakes: the fundamental and inalienable right of a startup. Every employee of a startup has the right to make a mistake (to err is human). All startups operate in a zone of uncertainty and we cannot hope that any hypothesis will be confirmed with a probability of any close to 100%. Moreover, we must be aware of the fact that most of our hypotheses will ever be confirmed. As an investor, I believe that each question has 1000 possible answers, of which 900 are incorrect, and the other 100 are correct. Out of the 100 correct, you need to choose the best one suitable for these circumstances. We have no methodology to define what are these 100 correct and the 1 that actually fits. Except for one. This methodology involves conducting experiments […]
Startups use plenty of communication methods to reach out to investors. Cold emailing contacts is not considered the most effective of them. Yet, Unicorn Nest is currently building a tool that could change cold emailing by helping startups quickly set up emails and manage all communications with funds (you can learn more and join the waitlist here). In this article, I show how our advanced cold emailing method can help you reach the right investors. A potential investor receives up to 600 emails any given day. A startup needs to break through this cascade of information and make sure the right person gets the right message. An entrepreneur also may need to write at least three to five emails to these select investors. This strategy can be called “the rule of five touches,” trying to make contact with a potential investor five times. Finally, startup entrepreneurs need to track their […]