We’re kicking the Super Angel series into a whole new gear for 2024 by introducing Seedcamp-partner Tom Wilson as our new co-host 🥳 alongside the existing host team of the amazing Anthony Danon from Cocoa, David and Andreas 🎙️
But before celebrating Tom, let us just pause and extend a heartfelt shoutout to Anthony Danon, whose contributions as a co-host have been pivotal to the Super Angel Podcast so far 💖. Anthony's vast network, particularly potent within fintech (but, tbh, generally quite mindblowing), has brought forth some of the most brilliant founders and operators to our platform.
But there’s another reason why Anthony is the perfect host for the series: with just shy of twenty angel investments made prior to launching his angel fund Cocoa, his money is where his mouth is - and with two portfolio unicorns, that’s a good place 🦄.
Anthony's deep understanding of the VC space and his dedication to bridging the gap between angels and VCs have been invaluable. His efforts have not only sculpted the podcast's feel, but also its success.
Thank you, Anthony. We can’t wait to continue on our joint journey for decades to come 🚀
Welcoming Tom Wilson to the host team 🎧
Tom comes to us with a wealth of experience from Seedcamp, where he has worked closely with some of the most promising startups in Europe. But Seedcamp is way more than just one of Europe’s top tier seed VCs with a ludicrous track. Ever since their founding in 2007, Seedcamp has been dedicated to connecting VCs and Angels across Europe having built its own fully-fledged network economy where 1,000+ founders, experts, angels and VCs come together to make each other stronger.
Reading the Seedcamp story is in many ways like reading European Seed history 👇
Or as Tom said in connection to the launch of Seedcamp VI:
It does make sense to build a village around the founders for that initial phase and so with our very collaborative approach, and the fact that we had the chance over the past years to work with pretty much everyone that invests early in Europe, we can be a catalyst to really help entrepreneurs find the best partner for that round.
Being a catalyst for finding the right partners. That’s exactly what the eu.vc pod is about - be that as an LP, a co-investor or a founder. Connecting Europe. The super angel series being specifically designed to champion the amazing angels across the continent.
By joining the Super Angel Podcast, Tom brings the collective wisdom of Seedcamp to the forefront, offering listeners a unique insight into the journey of tech investing from the ground up.
In case you should’ve missed some of our Super Angel episodes (which you’d be excused for, we’re keeping a pretty good pace on the pod), we’ve collected them all for you on the playlist below 🎧
Hope you’ll enjoy and share it with a friend or two 💖
What else is new? David’s got a recap of the week in European Venture for you 🗞️
European Venture: Steadfast Amidst Slowdown
Resilience and Innovation Pave the Way for VC Investment in European Tech Amid Economic Slowdown
The third quarter of 2023 has brought forth a blend of challenges and opportunities, painting a complex but intriguing picture of the investment climate.
Despite a noticeable slowdown in overall deal activity, we see resilience and strategic shifts across various sectors. From the enduring strength in high-value deals to the innovative approaches emerging in liquidity management, the European market is adapting with remarkable agility. Notably, sectors like AI, ML, and biotechnology continue to dominate the investment landscape, signifying a steadfast commitment to future-forward technologies.
We are also witnessing a transformation in investor behavior, from evolving GP/LP dynamics to an increase in direct investing, reflecting a more nuanced approach to capital allocation. Additionally, the interplay between policy initiatives and market forces is shaping new narratives, especially in pension fund investments and tech sector resilience.
Highlights
📉 Market Slowdown: Deal activity in Europe's VC market decreased in Q3 2023, with fewer deals and a reduced total deal value. The total deal value dropped by 20% compared to Q2 2023.
🧠 Tech Focus: AI & ML and biotechnology continue to lead in the VC landscape of emerging technologies, attracting over 30% of the total investments in the sector.
💰 Stable High-Value Deals: Despite the overall market slowdown, high-value investments over $100 million remain consistent, matching the average of the past two years.
📊 Consistent Deal Value: Median deal values are holding steady, indicating resilience in the face of broader market corrections. The median deal size remains around $15 million.
🤝 Evolving GP/LP Dynamics: The GP/LP relationship is shifting, potentially making private markets more mainstream. New fund structures are being explored to enhance accessibility.
💧 Liquidity Innovations: Innovative solutions like continuation vehicles are emerging to tackle liquidity concerns. These vehicles have facilitated over $5 billion in transactions this year.
🌱 Direct Investing Growth: There's an increase in direct investing among sophisticated investors, though challenges in discovery and engagement persist. Direct deals accounted for 10% of total investments in 2023.
🔻 Pension Fund Pullback: European pension funds significantly reduced private market commitments in 2023, with some funds cutting allocations by up to 50%.
🇬🇧 UK Policy Push: UK initiatives aim to boost pension contributions to private markets, citing potential for higher returns. The government introduced tax incentives to encourage this shift.
📉 Conservative Asset Allocation: UK pensions are under-allocated in equities, affecting average returns compared to international peers. Equity allocations are as low as 20% in some major UK pension funds.
🔄 Strategy Shift Case: Examples from larger pension schemes like CalSTRS suggest benefits from more aggressive private market strategies. CalSTRS increased its private market investments by 15% last year.
🔍 Smaller Fund Dilemmas: Accessing private market strategies is a major discussion point for smaller pension funds, focusing on potential partnerships. Funds under $1 billion are considering joint ventures to access these markets.
💡 Tech Talent Magnet: Europe's tech sector, especially in sustainability and healthcare, is attracting global talent. Over 50,000 tech jobs were created in these sectors across Europe in 2023.
🌱 AI & Climate Tech Growth: Europe's AI and climate tech sectors are seeing significant investment and growth, with over €2 billion invested in these sectors in the past year.
🎯 Purpose-Driven Leadership: Europe leads in purpose-driven tech investment but faces challenges in providing equitable funding. European startups receive, on average, 30% less funding than their US counterparts.
🚀 Tech Resilience: The European tech industry remains an attractive option for talent, despite macroeconomic challenges. Tech employment in Europe grew by 5% in 2023.
📉 Secondary Market Trends: The VC secondary market is witnessing growth, with significant fund raises targeting late-stage ventures at a discount. Over €500 million was raised in secondary funds targeting European startups.
🔍 Increased Ownership Opportunities: Falling valuations in VC are allowing for larger stakes in companies. Median stakes in mature companies increased from 11.3% to 14.9%.
💭 Diverse VC Perspectives: Contrasting views on VC strategy and AI investments reflect the market's dynamic nature. The success of recent SaaS companies in public markets challenges some of these critical views.
🤝 M&A Strategies: In tech M&A, strategic acquirers seek long-term integration, while financial sponsors focus on short-term returns. Over 70% of tech M&A deals in 2023 were driven by strategic acquirers.
💵 Tech Funding Dynamics: Over €1.1 billion in tech funding deals in Europe last week, signaling a return to normalcy. Notable deals included ZeroAvia's $116M Series C and Sport Alliance's $100M commitment.
🌐 Global Tech Influence: The European tech scene remains influential with major funding rounds, M&A activities, and environmental impact considerations. Austria's electronics industry, particularly in semiconductors, is emerging as a key player.
Deep Dive
Market Adaptation Amidst Challenges
The third quarter of 2023 in the European VC landscape has been marked by a significant shift, as evidenced by the 20% drop in total deal value compared to the previous quarter. This reduction, highlighted in PitchBook's Q3 2023 report, signifies a broader market recalibration. Despite this slowdown, there is a clear demonstration of resilience and adaptability within certain segments of the market. The consistent performance of high-value deals, maintaining a steady flow over $100 million, indicates that investor confidence remains robust in specific sectors. This resilience is especially noteworthy in the context of the broader economic slowdown, suggesting a strategic reallocation of funds towards more promising or stable ventures.
Sector-Specific Strengths
The continued dominance of AI, ML, and biotechnology sectors, capturing over 30% of the total investments in emerging technologies, represents a steadfast commitment to innovation-driven markets. This focus, as outlined in the Atomico's State of European Tech report, underscores the European VC market's inclination towards sectors that promise long-term growth and technological advancement. The unwavering interest in these sectors, despite the overall market contraction, points to a clear understanding that innovation remains a key driver of future market success.
Investor Behavior and Market Dynamics
The evolving dynamics between General Partners (GPs) and Limited Partners (LPs) signify a potential shift in the VC ecosystem towards more mainstream private market strategies. This evolution, as discussed in the ALTS Newsletter, reflects a broader trend of diversifying investment approaches and exploring new fund structures to enhance market accessibility. This shift is indicative of the market's response to current economic conditions, seeking to balance risk with the pursuit of new opportunities.
Simultaneously, the emergence of innovative liquidity solutions like continuation vehicles, facilitating over $5 billion in transactions, marks a significant development in addressing liquidity concerns. This innovation is crucial in a market where traditional exit routes, such as IPOs or acquisitions, might be constrained due to market conditions.
The Rise of Direct Investing
The increasing preference for direct investing, accounting for 10% of total investments in 2023, reveals a nuanced change in capital allocation strategies. This trend, reflecting a more direct engagement with investment targets, suggests that investors are seeking more control and closer involvement in their investment decisions. This approach can be attributed to a desire for more significant influence and better-aligned interests between investors and their portfolio companies.
Pension Funds and Policy Influences
The notable pullback of European pension funds from private market commitments, with some reducing allocations by as much as 50%, marks a significant shift in institutional investment strategies. This trend, coupled with the UK's policy initiatives aimed at stimulating pension contributions to private markets through tax incentives, as reported in various financial news outlets, reflects a strategic response to the changing investment landscape. This shift is particularly impactful given the scale and influence of pension funds in the investment ecosystem.
Tech Talent and Industry Growth
The European tech sector's ability to attract global talent, especially in sustainability and healthcare, is a bright spot in the current market scenario. The creation of over 50,000 tech jobs in these sectors across Europe in 2023, as highlighted in the Tech.eu report, not only demonstrates the sector's resilience but also its potential as a growth driver in the broader economy. This growth in tech employment, amid a general market slowdown, underscores the sector's appeal and the ongoing demand for innovation and skilled professionals.
AI and Climate Tech: A Beacon of Growth
The significant investment in AI and climate tech sectors, with over €2 billion injected in the past year, signifies a clear acknowledgment of these areas as critical drivers of future growth and innovation. This investment trend, reflective of a broader global movement towards sustainable and technologically advanced solutions, positions Europe at the forefront of these pivotal sectors. The sustained investment in these areas, despite the broader economic challenges, reinforces the belief in their long-term value and transformative potential.
Looking Ahead: Market Perspectives and Strategies
The current European VC landscape presents a complex picture of adaptation and resilience. Investors are recalibrating their strategies in response to the broader economic slowdown, focusing on sectors that offer long-term growth potential. The continued strength in high-value deals, coupled with strategic shifts in investment approaches, suggests a market that is cautiously optimistic and willing to innovate in the face of challenges. As we look ahead, it will be crucial for investors to maintain a balanced approach, aligning risk management with the pursuit of emerging opportunities in the evolving European VC ecosystem.
Links & Resources
PitchBook Q3 2023 Emerging Tech Indicator: Link
Atomico's State of European Tech Report 2023: Link
PitchBook's News on VC Valuations: Link
Mostly Metrics on M&A: Link
Sunday CET Newsletter: Link
The Information's Article on Vinod Khosla: Link
Sifted's Article on Web3 and Synthesia: Link
The Super Angel Series Soars to New Heights with Seedcamp's Tom Wilson on Board ❤️🔥