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04.2

$1B+ Companies

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The number of European tech companies scaling to a $1B+ valuation continues to grow at an impressive speed. Europe saw the creation of 18 new $1B+ tech companies in 2020, including its 200th overall, and now has 208 in total.

$1B+ companies


208
tech companies scaled to $1B+ in Europe

Number of VC-backed and non-VC-backed $1B+ European tech companies per year (cumulative)

Legend

  • # of non-VC-backed companies
  • # of VC-backed companies
Note:
Based on data up to 15 November 2020.

An important discussion in European tech in 2020 has been the role of alternative sources of funding for startups. Looking at companies started in Europe since 2010 that have reached a $1B+ valuation, venture capital is now the funding journey of choice for the vast majority. But it is also true that many companies still reach that scale without taking a single dollar of venture capital. In fact, it is likely that there is a sample bias in this dataset as these companies are typically growing outside of the "mainstream" tech industry and remain "hidden giants". This is explored in further details in the article on "Private Equity".

Share of VC-backed and non-VC-backed $1B+ European tech companies (%) per founding year decade

Legend

  • # of non-VC-backed companies
  • # of VC-backed companies
Note:
All Dealroom.co data excludes the following: biotech, secondary transactions, debt, lending capital, and grants. Please also note that the data excludes Israel. Based on data up to 15 November 2020.

Allegro. Visma. Sinch. Infobip. Idealista. Freepik. Silae. Adevinta. I can keep going. There are two common threads that run along these [non VC-backed] companies – they are incredible businesses and they are underreported.

On one end, they show us that building and scaling a software company is doable without VC money. We’ve gotten ridiculously good at celebrating press releases but tech is not just TechCrunch. On the other end, these companies usually lack what makes VC-backed tech companies great for European tech.

Going back to Allegro: their IPO was an incredible success story but it won’t recycle capital or talent into the Polish or European tech ecosystem in any way whatsoever. The IPO was great for the C-suite and lenders, but not for employees to go on and start or fund new companies.

Both worlds have a lot to learn from each other – but what gives me a dose of optimism is that they are getting increasingly closer, with the Pipedrive / Vista Equity Partners long-term partnership being the perfect example.

Gonz Sanchez

Seedtable

Founder

Shortly after the publication of the 2019 edition of this report, Vinted became Europe's 100th VC-backed company to reach the billion-dollar mark. Since Vinted, a further 15 new companies have reached $1B+ valuations - including 13 in 2020 - amounting to 115 VC-backed $1B+ tech companies in Europe.

VC-backed $1B+


115
tech companies in Europe

Number of new and total $1B+ VC-backed European tech companies per year

Legend

  • Existing
  • New in Year
Note:
All Dealroom.co data excludes the following: biotech, secondary transactions, debt, lending capital, and grants. Please also note that the data excludes Israel. Based on data up to 15 November 2020.

VC-backed European tech companies reaching a $1B+ valuation in 2020

The 2020 cohort of $1B+ companies consists of an impressive set of 13 VC-backed companies, ranging from electric VTOL jets (Lilium) to an online car marketplace (Cazoo) to a virtual event software company (Hopin). These 13 companies have an aggregate value of nearly $25B.

Transportation

Transportation

London, United Kingdom

Transportation

Transportation

Tallinn, Estonia

Marketplace

Marketplace

London, United Kingdom

Enterprise Software

Enterprise Software

Paris, France

Enterprise Software

Enterprise Software

London, United Kingdom

Transportation

Transportation

Munich, Germany

Enterprise Software

Enterprise Software

Amsterdam, Netherlands

Marketplace

Marketplace

Paris, France

Fintech

Fintech

Amsterdam, Netherlands

Enterprise Software

Enterprise Software

Tallinn, Estonia

Security

Security

London, United Kingdom

Enterprise Software

Enterprise Software

Lisbon, Portugal

Enterprise Software

Enterprise Software

Dublin, Ireland

Europe's VC-backed tech companies continue to scale to ever greater levels. Adyen and Spotify have both reached $50B+ valuations, having grown significantly in the public markets in 2020. Behind those two giants of European tech, there are a further 10 VC-backed companies that have now scaled beyond the $10B mark.

Number of $1B+ VC-backed European tech companies by valuation group

Note:
All time $1B+ VC-backed European tech companies. All Dealroom.co data excludes the following: biotech, secondary transactions, debt, lending capital, and grants. Please also note that the data excludes Israel. Based on data up to 15 November 2020.

A sizeable portfolio of European startup giants now stand ready to capture the IPO landscape and meet pent up demand.

Whilst Europe has originated more than a third of the world’s startups, it accounts for disproportionally smaller count of unicorns globally. This gap is in many ways attributable to a previously limited supply of large, late-stage risk capital pools. Fortunately, this is changing rapidly. Driven by the growth in recent years of European funds writing bigger checks at larger valuations and an influx of U.S. and Asia-based funds looking for quality and value – the stable of European unicorns is growing - with an additional 14 in 2019 and 18 in 2020. A sizeable portfolio of European startup giants now stand ready to capture the IPO landscape and meet pent up demand.

Additionally, the SPAC or Special Purpose Acquisition Company, an exit of choice right now in the U.S., is beginning to find its way across the Atlantic. These are not novel structures, but the latest batch is backed by top-rate financial institutions and serial investors seeking highly sought-after targets. Orrick has helped navigate companies through a string of these deals and we expect to see SPACs become a driver of European exit planning. As a result, we’re optimistic that next year’s IPO metrics will tell a quite different story.

Ed Lukins

Orrick

Partner, Capital Markets

Another first for European tech was the christening of two decacorns, i.e. private VC-backed tech companies with a valuation of more than $10B. Sweden's Klarna and Romania's UiPath both hit this milestone during 2020, making them the first and second most valuable private, VC-backed European tech companies.

Most valuable fintech


$11B
making Klarna the most valuable private European fintech company

Top 10 VC-backed $1B+ private European tech companies

Fastest companies to scale to $1B+ valuation by months from founding

Skype held the title of Europe's fastest ever VC-backed company to hit a billion-dollar valuation for 15 years. This record was broken twice in just a few months in 2020. First, Cazoo hit a billion-dollar valuation in June, 18 months after being founded. Hopin then broke this record in November 2020, having scaled to a $2.1B valuation in 17 months.

17 months

17 months

months to reach $1B+ valuation in 2020

18 months

18 months

months to reach $1B+ valuation in 2020

29 months

29 months

months to reach $1B+ valuation in 2005

31 months

31 months

months to reach $1B+ valuation in 2018

32 months

32 months

months to reach $1B+ valuation in 2019

Europe has now seen $1B+ tech companies emerge from 24 countries all around the region. It's a remarkable validation of the belief that great companies can come from anywhere.

Number of $1B+ European tech companies by country of origin and backing status

Note:
Based on data up to 15 November 2020.

Several Dutch startups are now unicorns or getting closer to it, which makes The Netherlands a more obvious choice for worldwide talent to start or grow their career.

Several Dutch startups are now unicorns or getting closer to it, which makes the Netherlands a more obvious choice for worldwide talent to start or grow their career. But homegrown startups and more US tech companies have called Amsterdam home in the last few years. This also puts a career in tech on the map for talent from traditional educational backgrounds, agencies, or corporates. For founders, there is a serious lack of capital from investors with operational experience. Most capital is also being invested beyond the seed stage. More established founders and operators have to start writing checks. (And by checks, I just mean wire transfers. What are we, Neanderthals?)

Robert Gaal

Cooper

Co-Founder

Europe first built a reputation in consumer, but the rise of European SaaS has helped to transform the region's role in the global enterprise software market. In a year of so many milestones, 2020 also marks the year that the number of VC-backed $1B+ enterprise-focused European tech companies finally caught up with consumer. The count, as of report publication, stands at 53-54 with Pipedrive breaking the tie.

Number of $1B+ VC-backed European tech companies, enterprise versus consumer

Source:
Note:
Based on data up to 15 November 2020.

The rise of SaaS in Europe is exemplified by the number of new SaaS unicorns minted in 2020. Six new billion-dollar SaaS companies emerged this year, beyond any other industry and placing Enterprise Software at the top of the list for the first time. These included companies such as Dataiku, MessageBird, Pipedrive and Snyk.

Number of $1B+ VC-backed European tech companies by industry, all time

Legend

  • Existing
  • New in year
Note:
Based on data up to 15 November 2020.

We grew MessageBird to a €100 million business, with no outside funding or investors whatsoever, until 2017 when we secured our first VC financing. Since then, MessageBird’s team has been focused on building a world where we can talk to businesses the way we talk to our friends, through all the same channels like WhatsApp and SMS. We’ve achieved incredible results, but we still have a long way to go. This year, we were able to raise additional capital through private markets, and people ask me when we’re going to IPO. We are operating at the highest level of financial integrity, run as an IPO company, but we will ring the bell when it makes sense.

Robert Vis

MessageBird

Founder

53 VC-backed European tech companies founded during the last decade (2010s) have scaled to $1B+ valuation. As is to be expected, those companies overwhelmingly remain in the private markets. More than half of the companies founded in the 90s, 2000s or 2010s have already either made their transition to the public markets or have been acquired.

Companies founded in last decade


83%
of $1B+ VC-backed tech companies founded in the 2010s are still private

Share of $1B+ VC-backed European tech companies (%) by ownership status and founding year decade

Legend

  • Private
  • Public
  • Acquired
Note:
All Dealroom.co data excludes the following: biotech, secondary transactions, debt, lending capital, and grants. Please also note that the data excludes Israel.

Liquidity is a key concern for VC investors globally as companies remain private longer and growth capital is increasingly available for companies willing to scale and preserve their independence.

That being said, Europe-based venture firms should be able to improve exit prospects over time. M&A is the most frequent exit route for VC backed companies. In a low interest rates and low growth environment where technology is key for every business, strategic acquirers are likely to be active in the coming years and attractive VC-backed companies from Europe could be on their shopping list. The best companies will also expand internationally and have access to capital from global investors. They could eventually qualify for IPOs in Europe or in the US. The development of more active secondary markets is another possibility. Whatever happens, if the European ecosystem keeps producing an increasing density of emerging companies with sustainable business models and enduring growth prospects, I trust liquidity opportunities will follow. It is still early days compared to the US and we need to be patient.

Xavier Coirbay

Sofina Group

Executive Committee

Europe has a healthy pipeline of companies preparing to go public, with many of the region's privately-held $1B+ tech companies having signalled their intent to IPO in 2021. The pipeline today now exceeds $150B based on the combined enterprise value. Europe's private fintech companies alone now account for $50B in combined enterprise value. It's much less a question of whether these companies will list, but of when and where. Will they go public in Europe or head to the US?

Total aggregate value ($B) of private VC-backed $1B+ European tech companies by industry

Note:
Based on data up to 15 November 2020.

The rise of this growing cohort of European unicorns on the ecosystem has had a dramatic impact on the total value of the European tech ecosystem. The total estimated enterprise value of European tech companies founded after 2000 in the public and private markets has ballooned to almost $1 trillion ($961B), up 5x from $191B in 2016. The vast majority of this value remains in the private markets today ($573B), which have seen the creation of more than $400B in enterprise value since 2016.

ecosystem value


5x
increase in the size of the ecosystem value since 2016

Total estimated enterprise value ($B) of European tech companies founded after 2000, in private and public markets

Legend

  • Public
  • Private
Note:
All Dealroom.co data excludes the following: biotech, secondary transactions, debt, lending capital, and grants. Please also note that the data excludes Israel.

The aggregate value of private European tech companies has grown to more than $570B, including dozens of companies that have scaled to $1B+ valuations and are still private. These companies represent the pipeline of future IPO candidates. An important consideration that will influence the decisions of these companies on if and where to list is their expectation of how their value proposition and business model will be understood by public market investors. To that end, we have mapped the distribution of public European tech companies by category with the distribution of private $1B+ European tech companies with a view to identifying if the public companies have depth of expertise, or if there may be gaps.

Share of European public tech for companies <$1B, >$1B versus private companies >$1B

Legend

  • Tech Hardware
  • Online Commerce
  • Consumer Internet
  • Semiconductors
  • Fintech
  • Enterprise Software
  • Games & Interactive Entertainment
  • Internet Advertising & Direct Marketing
  • Others
Note:
Numbers may not add up to 100 due to rounding. S&P Capital IQ Platform, as of date 31 October 2020, for illustrative purposes only.

Europe’s startup ecosystem has developed significantly over the past decade, with unprecedented growth in funding, jobs, and valuations. But there are nonetheless still challenges ahead such as a lack of exit opportunities, including IPOs or M&A.

This is mainly because top platform companies are missing in the European ecosystem and because there is a different historical experience with investing in the public stock market.


Another challenge is fragmentation. Europe is not a single, unified market; it is an aggregation of 27 markets in the EU, and 51 markets across the continent, each with its own language, entrepreneurial culture, ecosystem, regulation, and sometimes even currency. While this of course is one of the factors that makes the market so vibrant, Europe is much more complex compared to the US when it comes to scaling a company as it involves operating across multiple geographies.


Finally, diversity and inclusivity are sizable challenges, but that is something that all geographies face! On the whole, the European startup scene is emerging from the shadows of Silicon Valley, successfully developing globally-known innovations and businesses for consumers and enterprises alike. This is inspiring a new generation of founders and entrepreneurs and fuelling this growth in years to come.

Young Sohn

Samsung Electronics

President and Chief Strategy Officer

An important question for the European ecosystem is what happens to the value created by its leading tech companies. Do they stay independent and transition into the public markets? And, if so, where do they choose to list? Do they end up being acquired? If so, by whom?

These questions matter as they help to understand where and by whom future value created by these companies will be captured. To try to answer this, and working in partnership with Horsley Bridge, this analysis sets out the exit route of every VC-backed European company that has exited at a billion-dollar valuation or higher covering more than 50 companies.

The majority of value has transitioned to the public markets with the IPO exit route accounting for 74% of exit value. Importantly, from the perspective of retaining value in Europe, the US accounts for the largest share of exit value at a combined 52% of the total across both IPOs that listed in the US and acquisitions by US buyers.

VC-backed $1B+ European tech companies value flow by HQ country and by exit route

VC-backed $1B+ European tech companies value flow by HQ country and by exit route

People used to wonder if Europe could create $10 billion companies. Now the question is: what will be the first $100 billion company?

The past few years have been really exciting for European tech. People used to wonder if Europe could create $10 billion companies. Now the question is: what will be the first $100 billion company? We’re seeing more and more world-class tech companies being formed across the region, by ambitious founders who want to win on a global scale. That’s why Sequoia is doubling down in Europe and building our local team, to meet these founders as early as possible and be a stronger partner for our portfolio companies on the ground.

The rich pool of technical talent means Europe isn’t just catching up, it’s leading the way, particularly across sectors like enterprise software, deep tech and fintech. At Sequoia, we’re excited to grow our presence in the region, privileged to have received such a warm welcome from the ecosystem and looking forward to partnering with many more market leaders with roots in Europe.

Luciana Lixandru

Sequoia Capital

Partner