BERLIN (Reuters) – With Europe in coronavirus lockdown, venture capital fund manager Fergal Mullen told his investors in April he would find it hard to back a startup without first meeting its founders.
A couple of months later, the Geneva-based co-founder and partner of Highland Europe broke his own promise and invested in Meditopia, a mindfulness app with teams in Berlin and Istanbul that he got to know over some 40 calls on video app Zoom.
“I had to eat my hat,” said Mullen, looking back on a year of deal making that, after a sudden stop in the spring, came back to life in late summer and has gathered pace since.
Highland Europe has just raised 700 million euros ($850 million) for a fourth fund, its largest, and is preparing for the sale or flotation of around 10 of its portfolio companies next year.
And, according to interviews with more than half a dozen investors, the wider recovery in European tech investment activity looks likely to extend into 2021 as venture-backed startups achieve scale.
Proceeds raised by European venture funds have already hit an annual record 17.1 billion euros in the year to date, while the amount invested in startups has reached 39.7 billion euros, according to data platform Dealroom.co.
Taking into account reporting lags, the final sum invested is on track to beat last year’s all-time high of 40.3 billion euros, said Tom Wehmeier, partner at Atomico and author of the closely-watched State of European Tech https://2020.stateofeuropeantech.com report.
“The scale of those outcomes is getting bigger and bigger, and the velocity in which value is being created – it’s getting faster and faster,” said Wehmeier, pointing to the 115 venture-backed ‘unicorns’ in Europe valued at more than $1 billion.
While Europe still lags North America by four to one in dollars invested in tech startups, the institutional money flowing into venture capital has grown threefold over the last five years.
Nearly two-thirds of venture capitalists and 70% of their investors expect European tech to gain ground on the United States and China over the next decade, according a survey by Atomico.
Graphic: European technology investment https://graphics.reuters.com/TECH-EUROPE/azgvoykjgvd/chart.png
DRY POWDER
Early-stage and growth investor Index Ventures raised $2 billion just before the coronavirus pandemic hit, and soon discovered that remote working enabled it to review and do deals far more quickly.
“We never had a slowdown and had a lot of dry powder,” said partner Martin Mignot. “With everyone remote we can see and meet more entrepreneurs.”
Where deal flow has slowed is via exits onto public markets, with proceeds from initial public offerings (IPOs) by European technology firms less than half their 2018 peak even as a string of IPOs took U.S. markets by storm.
That partly reflects the growing depth of private markets, however, say investors who point to Klarna, the Swedish financial technology company, achieving a valuation of more than $10 billion in its latest funding round.
UiPath, whose software helps automate routine business tasks, has achieved similar ‘decacorn’ status while still private and, like Klarna, is eyeing an IPO in 2021.
The Romanian startup now has a U.S. headquarters and plans to float there. That’s a common route for European startups chasing rich U.S. valuations and founder-friendly listing rules – and a challenge for Europe’s tech ecosystem, investors say.
UiPath was backed in its infancy by Earlybird, whose emerging Europe fund turned heads in June when Istanbul-based Peak Games, in which it had invested, was sold to Zynga Inc for $1.8 billion.
Such deals are breeding new startups even in parts of Europe previously little known for home-grown tech entrepreneurship.
“Every liquidity event, every acquisition, every IPO ends up spawning groups of these talented people,” said Earlybird’s Cem Sertoglu.
LONDON STRONG
While the remote working trend is helping founders take on global markets without having to relocate to Silicon Valley, it is also taking the edge off the near-term risks arising from Brexit – Britain’s looming exit from the European single market.
“It won’t affect the momentum that much in 2021, given how much pent-up demand there is, how much money is sitting on the sidelines, and how many conversations are happening,” said Erin Platts, the London-based regional head of Silicon Valley Bank, a specialist lender to technology firms.
Britain has actually extended its lead this year in venture fund raising and its tech startups have attracted a third of total European investment, Dealroom.co data show.
It also remains the preferred landing zone for U.S. software firms seeking to gain a foothold in Europe, said Stephen McIntyre of early-stage investor and advisory firm Frontline.
“The only people who are talking about Brexit are the Brits and Irish,” said McIntyre. “With U.S. CEOs, not only does it not come up – they honestly think it’s done.”
($1 = 0.8230 euros)
(Writing by Douglas Busvine. Editing by Mark Potter)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
