Ultimate Startup Toolkit
23 Jun, 2021
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.
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 the conclusions, which for the selected industries ranged from x1.1 for Healthcare to x2 for Virtual Currency. When compiling the list, it was essential for us to assess these industries’ weight at other stages: they refer to 15,1% of all Seed rounds in the region and 15,2% of all Exits in the area. The fundraising activity for selected industries can be seen in the illustration below (the ordinate shows the number of funding rounds).
It should be noted that the selected industries are not historically developed in Europe (Agriculture, Manufacturing, Banking, Transportation). This confirms the hypothesis that the absence of an outdated and bureaucratic ecosystem is a favorable environment for the development of startups.
To identify the niches in which Europe can be competitive in the global fundraising landscape, we compared the trends of selected industries inside and outside Europe. Of course, the number of European A-rounds for these 7 industries is always lower in absolute numbers. But we were able to highlight several important insights:
A) Europe is the absolute winner in all 7 nominations.
Civil Engineering, Content, Electronics, Gaming, Health Care, Virtual Currency (6 out of 7 selected industries) outside Europe show a steady decline in the number of rounds A deals. Only Insurance is not falling, but it is growing 25% slower than in Europe.
B) The most significant gap in the up/down trend (in descending order): Virtual Currency, Civil Engineering, Gaming.
The European trend shows ups and downs in the same periods as geographies outside Europe. This is a logical fact since the industry is relatively new and more susceptible to external influences than others. But it should be noted that the number of rounds in Europe shows less volatility. Also, at the end of 2020, the curves began to converge. The reason may be that the European Virtual Currency startups are younger and more flexible and could react to the rumors of the upcoming Coinbase direct listing earlier than the rest of the world.
There is no correlation between Europe and the rest of the world in the number of rounds raised. At the end of 2020, Europe caught up with the rest of the world regarding the absolute number of A-round deals. This growth in the COVID-19 era is phenomenal. How European startups succeeded in this will be mentioned in the last section of the post.
Since the beginning of 2019, we have seen an opposite trend in the number of rounds in startups between Europe and the rest of the world. This illustrates, on the one hand, the intense competitiveness of European startups, and on the other hand, it is one of the signals of a market glut at this stage of technology development. However, at the end of 2020, the European trend was still able to maintain its position.
At the end of the post, I want to highlight 2 facts, which were the most surprising for me.
Since the beginning of 2019, there has been a steady drop in the number of A rounds in the Artificial Intelligence industry. This is an organic consequence of how much this industry has been overhyped in recent years: founders are attracting seed rounds with loud promises that they cannot deliver at the stage of product growth.
And look at the explosive growth of the industry in Q3 and Q4 last year, when quarantine uncertainty raged with all its might. The main driver of such growth is the sector of smart building infrastructure management solutions and consulting services. In the pandemic and WFH era, key industry players successfully took the opportunity to improve everyday life by IoT and advent digitization.
As I promised at the beginning of the post, I want to share information for those planning to raise Round A right now. Now Unicorn Nest is on the verge of shipping an investor outreach system called ‘Connect’. It allows founders to manage a huge pipeline of investors, connect with funds via email, track crucial metrics, and much more. If you want to join beta testing and get 2 months for free, fill in the form on the website http://unicorn-nest.com/connect.
Also, if you want to agree or disagree with my findings, I am always open to discussions via email.