The European tech ecosystem is now worth more than $800 billion, with almost 50 percent of that value created in the last year, according to a report published in July by investment and advisory firm, GP Bullhoun—no mean feat in the midst of a pandemic.
But to be honest, news of yet another spike in tech sector investment doesn’t really come as a surprise. Over the past few years or so, we’ve all become accustomed to a narrative of ever-increasing sums being directed towards Europe’s innovation economy by VCs and angels. But it has been a narrative with a degree of nuance. These days we hear a lot more about “mega-deals” as both local and global investors focus on later-stage funding sounds. Seed finance has been healthy too, but there are continuing doubts about the availability of capital for businesses sitting in the middle reaches of the funding escalator.
So when I spoke to Manish Madhvani—a cofounder of GP Bullhound—I was keen to talk about the investment across the tech ecosystem as a whole. Are we now in a situation in which a new risk-averse mood is driving investors towards relatively well-established bigger companies or is money flooding in across the whole sector?
Decacorn Dreams
There is—it has to be said—a lot of excitement about unicorns at the moment. Here in the U.K.—where I’m based—local startup support agency, Tech Nation has been diligently highlighting the burgeoning numbers of billion-dollar businesses. The GP Bullhound report extends this narrative across Europe. Titled, Titans of Tech, the study notes that 52 companies have ascended to unicorn status over the past 12 months. Overall, the U.K. leads the way with Israel, Germany, and Sweden also performing well.
“And we are moving beyond the unicorns,” says Madhvani. “We are now seeing more $10 billion companies—the decacorns.” These include the likes of digital bank Revolut, shopping app, Klarna and payments business, Checkout.com.
But what lies behind the increased value of the sector as a whole? Madhvani cites a number of factors, not least increasing global appeal. “The best European companies were valued at lower multiples,” he says. “But what we’ve seen is U.S. funds becoming more comfortable with Europe. This has led to a huge rise in capital pushing up valuations.”
In addition, he notes increased willingness of public equity funds to increase the supply of capital.
Are All Boats Rising?
But what if you don’t enjoy the profile and trading record of a Revolut or Klarna. Is the incoming tide of investment helping all the boats in the harbor to rise?
Madhvani says the ecosystem has changed. “A few years ago, there was a lot of funding at the small end but it was difficult to get scale-up capital until the metrics of the business were proven,” he says.
That is changing. Success stories have sucked in capital at later stage funding rounds and Madvhani says this is also benefiting businesses further down the ladder. “There is a plentiful supply of capital and there is also a trickle-down effect,” he says. “Early-stage VCs have sold their shares and are now reinvesting.”
There is also more knowledge in the system. The success stories of European tech have created a generation of managers and executives who know what it means to scale up and can pass their skills and expertise on.”
Trends on the Market
The unicorn data to some extent points to the success stories of the tech boom – or at the very least to those segments where VCs are happy to invest large sums. Among Europe’s new $1 billion tech companies, GP Bullhound says 66 are in enterprise software, 31 in Fintech, 30 in marketplaces, and 15 in e-commerce.
Looking to the future, Madhvani says GP Bullhound sees marketplaces and e-commerce continuing to be “super hot” but new trends are emerging, not least because of the pandemic.
Blurred Lines
“There is a huge interest in healthcare and what we’re also seeing is a blurring of the line between health and education,” he says.
Entertainment and gaming are also on the rise as is collaboration software. In one way and another, these are all sectors that have been given a boost by the stay-at-home, work-at-home world we currently live in. Will it last? Madhvani thinks so and is particularly bullish about collaboration software.
Fintech remains something of a poster child for tech and Madhvani sees real opportunities for the market leaders, due to the data they process. “The winners in this sector can cross-sell health products, banking, insurance, and travel services,” he says.” They have so much data and we are moving into a period of instant decision making.”
Valuations don’t necessarily correlate exactly with the success of individual companies in the longer term, but higher valuations do mean that Europe’s tech companies are increasingly able to gain access to the funds they need. It’s not a uniform picture, though, some businesses do struggle around Series A and B. And certain sectors attract more funding than others.
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.
