European venture capital: a coming-of-age story New challenges - - PowerPoint PPT Presentation

European venture capital: a coming-of-age story

New challenges arising from success and maturity of the asset class Greg Revenu

Co-founder & Managing Partner Bryan, Garnier & Co

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Page 2 | Invest Europe Venture Capital Forum 2019

BRYAN, GARNIER & CO OVERVIEW

A full service independent partnership dedicated to European growth companies since 1997

LBO IPO Public M&A Follow-on Financing Private Placement M&A

Undisclosed Undisclosed CHF143m $230m €282m €72m $282m CAD500m €120m €100m €70m $435m

GLOBAL REACH

150 multicultural professionals based in London, Paris, Munich, Stockholm, Oslo, Reykjavik, New York, Palo Alto and Shangai

IMPACT

Total of €33b worth

• f investment banking

transactions More than 300 transactions delivered for more than 200 clients

INDUSTRY EXPERTISE

Exclusive focus on growth Deep expertise and networks in Technology, Healthcare, Consumer and Business Services

UNBIASED ADVICE

23 year old independent partnership Private and Public Equity Capital Raising, M&A, Equity Research, Equity Capital Markets

BACKING DISRUPTION

Backed 3 of the most disruptive unicorns of 2018

▪ Moderna’s $604m Private Placement & Nasdaq IPO ▪ Bitfury’s $100m Private Placement ▪ Canopy Growth’s CAD500m convertible bond issue

Leading European bank for US capital raises in 2018

▪ $1.6b raised from US investors

Led the largest European Medtech IPO in 2018

▪ Medartis’ CHF144m capital raise on SIX Swiss Exchange

Over €3.5 billion cumulated deal value in 2018

▪ for Healthcare & Technology transactions

More than 50 transactions closed in 2018

▪ across M&A, ECM and private placement

Proven thought leadership

▪ through sector specialist bankers and equity analysts covering >160 European listed companies

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Page 3 | Invest Europe Venture Capital Forum 2019

50 100 150 200 250 300 350 400 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 NYSE Tech STXE 600 Technology EUR

ALL MARKET INDICATORS IN THE GREEN FOR THE VENTURE ECOSYSTEM

• Long term global M&A activity remains at high level
• Public and private valuations still in the highs
• Global transaction value remains at its highest
• Mega deals are pushing total deal value upwards
• PE led valuations continue to rise
• Number of transactions slowing down on all

segments since Q2 2018 (M&A, ECM, VC, PE)

M&A activity, public and private market valuations still in their historical highs

European and US Technology indices evolution European and US Biotech indices evolution European VC M&A activity – Technology & Healthcare

8.1 8.1 10.3 10.3 13.5 19.7 19.8 23.1 25.4 2,495 3,068 3,671 4,693 5,648 5,849 5,752 5,658 5,305 2010 2011 2012 2013 2014 2015 2016 2017 2018 Deal value (€b) Deal count 100 200 300 400 500 600 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 NASDAQ BIOTECH INDEX MSCI Europe Pharmaceutic

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Page 4 | Invest Europe Venture Capital Forum 2019

GLOBAL PRIVATE EQUITY HAS BECOME A MAINSTREAM ASSET CLASS

With circa $1,500 billion of AUM, venture and growth represent now close to 50% of the asset class

56 47 26 29 11 8 11 36 59 3 5 6

803 $b 1,785 $b 608 $b Asia Europe North America Buyout Venture Growth

ROW Source : Preqin 2018, global PE AUM

• Private equity asset class

cumulative fundraising grew from $1,400b in 2006 to $2,500b in 2018

• The asset class continues to
• utperform public markets
• But return dispersion amongst GPs

is much greater in private equity than in public markets (-30% to +50% vs +3% to +12% in the US)

• Global venture fundraising has

grown faster than other PE segments of the past 5 years :

• Buyout: +4.3% ($230b)
• Growth: +11.4% ($60b)
• Venture: +17.8% ($80b)

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Page 5 | Invest Europe Venture Capital Forum 2019

EUROPEAN VENTURE CAPITAL ACTVITY IS RIDING HIGH

• VC asset class benefits from a strong performance, absolute as well as relative
• European average VCs performance matching US
• Measured by pooled returns, VC progressively outperforms buy-out (declining returns)
• But very wide dispersion of performance, held by limited number of funds
• The fundraising activity remains dynamic in Europe, with a trend to larger funds
• European VCs have been attracting circa. €10b of new capital per year since 2015
• Decreasing number of funds (from 100 funds for €6b before 2015 to 80 now), gearing towards larger average fund

size

• Annual investments have increased x3 in Europe since 2012 (7 times faster than number of deals)
• From approx. $10b to $30b+ expected in 2019, while number of deals increased by 40%
• Median size Series B have grown from $5m in 2012 to $23m in 2019 ($2.5m to $8m in Series A)
• In 2018, global 25 mega rounds (above $1b) accounted for 25% of total global investment
• Europe experienced close to 20 rounds above €100m in 2018 (Deliveroo Series G above $500m, Northvolt at $1b)
• Later stage represents more than 50% of total investments in value

European venture capital is generating increasing interest based on strong dynamics

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Page 6 | Invest Europe Venture Capital Forum 2019

EUROPEAN VC LANDSCAPE OF PLAYERS IS TRANSFORMING

• New type of investors are increasingly venturing into the broader asset class
• Corporate venture funds are active in 25% of the rounds
• Sovereign funds: BPI, Mubadala, Temasek, GIC, etc. have been increasingly active on the larger rounds
• Growth Funds and mega VCs with equity checks above $100m have extended the scope of venture capital
• Crossover, hedge funds and institutional investors are contributing to later stage flow of liquidity
• Buy-out funds, with dedicated growth vehicles (Blackstone, Bridgepoint, Towerbrook, KKR, Warburg Pincus,

Hermes GPE, etc.) are entering the market

• Traditional VCs are adapting to the environment : 4 major trends
• Trend 1, Size: Funds size is increasing
• Trend 2, Globalization: Globalization of the industry with increasing multi-local teams
• Trend 3, Multistage capacity: Providing ability to support the winning portfolio companies at favorable

terms

• Trend 4, Segmentation: Segmentation and specialization through dedicated vehicles

A more diverse investor base covering and a broader scope of situations

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Page 7 | Invest Europe Venture Capital Forum 2019

2018 AND 2019 ARE PROVING TO BE THE YEARS OF IPOS

Exit values of European and US venture capital in recent years have reached an all-time-high

Venture-backed exit activity by type in the US

In $b

Venture-backed exit activity by type in the US

In number of exits

Venture-backed exit activity by type in Europe

In number of exits

Venture-backed exit activity by type in Europe

In $b

*As of June 30, 2019

• 100

200 300 400 500 600 2012 2013 2014 2015 2016 2017 2018 2019* Strategic Acquisition Buyout IPO

• 200

400 600 800 1,000 1,200 2012 2013 2014 2015 2016 2017 2018 2019* Strategic Acquisition Buyout IPO

• 10

20 30 40 50 60 2012 2013 2014 2015 2016 2017 2018 2019* Strategic Acquisition Buyout IPO

• 20

40 60 80 100 120 140 160 180 2012 2013 2014 2015 2016 2017 2018 2019* Strategic Acquisition Buyout IPO

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LIQUIDITY OPTIONS ARE BROADENING

• IPO creates far more aggregated value than other exit routes, but for a few
• The IPO path still concentrates globally the largest exits, but remain below 10% in number in Europe
• Consistently more than 50% of exit value in the US (even 80% of exit value in H1), but less than 15% in volume
• 2018 was an exceptional year for IPO exits in Europe, generating close to 75% of the total exit value (approx.

$50b out of $65b of exits) with Spotify, Adyen, etc.

• Later stage and growth capital is becoming an alternative to mid-market IPOs
• Growth companies tend to stay private longer as they can access to significant later stage capital
• Increased number and type of later stage players and larger investment rounds favor secondary components

beyond Series B

• Buy-out funds have changed the technology M&A landscape
• Unlike strategic buyers, buyout funds are paid to acquire
• In ten years, they have tripled their allocation to the TMT sector, representing 30% of total M&A tech
• Generalists have been rushing into the market, with a strong focus on software
• The number of tech focused buyout funds launched by global PE firms has increased substantially

The expansion of the private equity asset class creates new exit dynamics

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Page 9 | Invest Europe Venture Capital Forum 2019

LONGER TERM CHALLENGES FOR A MATURING ASSET CLASS

• Intense investment activity has been drying out European VC investment capacity
• Investment activity has been intense over the past five years, (annual invested capital has almost tripled)
• Since 2013, cumulated investments massively exceeded total fund raised during the period (€100b vs €60b)
• A significant drop in investment activity is expected in 2019 with investment activity adjusting to the new capital

raised

• Competition for the best companies is increasing at all stages
• The expansion of the players beyond the traditional ecosystem creates market tension (CVC, late stage)
• Some new players are entering the market with a lower cost of capital (Infratech, growth/buy-out)
• Larger rounds, higher valuations on later stage is changing the way deals are being done
• Frontier between venture, growth and buyout is blurring
• More transaction processes, deeper and more demanding due diligence, with a more binary outcome
• Increased number of extended syndication for later stage rounds
• Increasing secondary components in Series C

The quest for outsized returns is changing the venture capital business

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This document is based on information available to the public and other sources deemed reliable. No representation or warranty, express or implied, is or will be made in relation to, and no responsibility or reliability is or will be accepted by Bryan Garnier & Company or any of its officers, employees or advisers as to the accuracy or completeness of this document or any other written or verbal information available to the recipient or its advisers. While all reasonable care has been taken to ensure that the facts stated are accurate and the opinions given are fair and reasonable, neither we nor any of our affiliated companies nor any of our, or their directors, representatives or employees, accepts responsibility or liability for any loss or expense arising directly or indirectly from the use of this document or its or its contents. This document is not and should not be construed as an offer, or a solicitation of any offer, to buy or sell securities. Bryan, Garnier & Co is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom.