European internet industry 2016: deal volume up, but deal value falls sharply
Financing of the European internet industry has continued to progress by deal volume, but declined in value in 2016, according to the latest European Internet Industry 2016 report released by our sponsors Silverpeak LLP and based on Go4Venture’s Headline Transaction Index (HTI) data.
The key finding of the report is that in 2016, the slowdown in venture and growth was not as drastic as anticipated. The funding decline was more pronounced in Q3, but deal volumes rebounded in Q4. A softening market resulted in investors being more discriminating, placing a greater emphasis on a clear path to profitability. It also found that there is a renewed interest in deep technologies – primarily driven by artificial intelligence (AI) and big data, which is making very high demands on infrastructure.
Based on Go4Venture data, an index (see footnote) based on deals in Europe over $10m in the tech sector, the report found that the decline in value of internet deals in 2016 is driven by a decline in transactions greater than $75m.
However, the market remains active in the traditional European sweet spot, deals between €7.5m and €25m. In particular, 2016 saw a significant increase in both volume and value in this category, with average deal size remaining stable year-on-year. This suggests Europe is building a strong pipeline of tech companies that could drive a rebound in large fundraisings this year (2017).
Furthermore, the data suggests that large European transactions consist mostly of series A & B rounds (see chart below).
Key observations from this chart are:
- Volume of European Series A and B rounds significantly accelerated in 2016
- Series B is holding up well with steady value, and volume of deals up 53%
- Number of Series A rounds doubled year-on-year
- Late Stage round have compressed and are not as high as expected
- Deal volume fell by 41% and value by 58% year-on-year
- Dispersion in deal size is significantly higher for Series C and Late Stage
- The European market is finally more like the US market
- By number, 60:40 split in both markets between initial funding rounds (Series A and B) and follow-on rounds (Series C and Late Stage).
The data also points to the UK being the largest destination for internet financing in terms of both volume and value of all large HTI deals (i.e. greater than $10m).
For further information and commentary on the sub-sector trends (B2B fintech, B2C fintech, marketplaces, travel, human resources, and e-commerce), please visit the full article on the Go4Venture web site.
Note on the Go4Venture European tech Headline Transaction Index (HTI)
Go4Venture is the European deal syndication and venture/growth information platform, publishing the market renowned Go4Venture ‘Headline Transaction Index’ (HTI), which is based on the number and value of transactions over $10m reported in professional publications. The HTI is used to measure investment activity, and as an early indicator of the progression of the private market cycle for European tech companies. For more information, click here.
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7yhi Nitin ....
Retired but open to short term engagements and coaching
7yAre Europeans selling out too early? Is it because late stage funding is still hard to get?