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
BRYAN, GARNIER & CO OVERVIEW A full service independent partnership dedicated to European growth companies since 1997 Backed 3 of the most disruptive unicorns of 2018 GLOBAL REACH UNBIASED ADVICE ▪ Moderna’s $604m Private Placement & Nasdaq IPO BACKING DISRUPTION ▪ Bitfury’s $100m Private Placement 150 multicultural 23 year old independent ▪ Canopy Growth’s CAD500m convertible bond issue professionals based in partnership Leading European bank for US capital raises in 2018 London, Paris, Munich, Private and Public Equity ▪ $1.6b raised from US investors Stockholm, Oslo, Reykjavik, Capital Raising, M&A, Equity New York, Palo Alto Research, Equity Capital Led the largest European Medtech IPO in 2018 and Shangai Markets ▪ Medartis’ CHF144m capital raise on SIX Swiss Exchange Over €3.5 billion cumulated deal value in 2018 INDUSTRY EXPERTISE IMPACT ▪ for Healthcare & Technology transactions Exclusive focus on growth Total of €33b worth of investment banking More than 50 transactions closed in 2018 Deep expertise and transactions ▪ across M&A, ECM and private placement networks in Technology, Healthcare, More than 300 transactions Proven thought leadership Consumer delivered for more than 200 ▪ through sector specialist bankers and equity analysts and Business Services clients covering >160 European listed companies Private Placement LBO M&A IPO Follow-on Financing Public M&A €120m €100m Undisclosed Undisclosed €70m $435m CHF143m $230m CAD500m $282m €282m €72m Page 2 | Invest Europe Venture Capital Forum 2019 2
ALL MARKET INDICATORS IN THE GREEN FOR THE VENTURE ECOSYSTEM M&A activity, public and private market valuations still in their historical highs European VC M&A activity – Technology & Healthcare • Long term global M&A activity remains at high level 5,849 5,752 5,658 5,648 5,305 • Public and private valuations still in the highs 4,693 25.4 3,671 23.1 • Global transaction value remains at its highest 3,068 19.7 19.8 2,495 • Mega deals are pushing total deal value upwards 13.5 10.3 10.3 8.1 8.1 • PE led valuations continue to rise • Number of transactions slowing down on all 2010 2011 2012 2013 2014 2015 2016 2017 2018 segments since Q2 2018 (M&A, ECM, VC, PE) Deal value (€b) Deal count European and US Technology indices evolution European and US Biotech indices evolution 400 600 350 500 300 400 250 300 200 150 200 100 100 50 0 0 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 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 NASDAQ BIOTECH INDEX MSCI Europe Pharmaceutic Page 3 | Invest Europe Venture Capital Forum 2019 3
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 1,785 $b 803 $b 608 $b ROW • Private equity asset class 3 5 6 cumulative fundraising grew from Asia 11 $1,400b in 2006 to $2,500b in 2018 • The asset class continues to 36 outperform public markets Europe 29 59 • But return dispersion amongst GPs is much greater in private equity 11 than in public markets (-30% to +50% vs +3% to +12% in the US) • Global venture fundraising has 8 grown faster than other PE North America 56 segments of the past 5 years : 47 • Buyout: +4.3% ($230b) 26 Growth: +11.4% ($60b) • Venture: +17.8% ($80b) • Buyout Venture Growth Source : Preqin 2018, global PE AUM Page 4 | Invest Europe Venture Capital Forum 2019 4
EUROPEAN VENTURE CAPITAL ACTVITY IS RIDING HIGH European venture capital is generating increasing interest based on strong dynamics • 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 Page 5 | Invest Europe Venture Capital Forum 2019 5
EUROPEAN VC LANDSCAPE OF PLAYERS IS TRANSFORMING A more diverse investor base covering and a broader scope of situations • 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 Page 6 | Invest Europe Venture Capital Forum 2019 6
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 Europe Venture-backed exit activity by type in the US In number of exits In number of exits 600 1,200 500 1,000 400 800 300 600 200 400 100 200 - - 2012 2013 2014 2015 2016 2017 2018 2019* 2012 2013 2014 2015 2016 2017 2018 2019* Strategic Acquisition Buyout IPO Strategic Acquisition Buyout IPO Venture-backed exit activity by type in Europe Venture-backed exit activity by type in the US In $b In $b 180 60 160 140 50 120 40 100 30 80 60 20 40 10 20 - - 2012 2013 2014 2015 2016 2017 2018 2019* 2012 2013 2014 2015 2016 2017 2018 2019* Strategic Acquisition Buyout IPO Strategic Acquisition Buyout IPO *As of June 30, 2019 Page 7 | Invest Europe Venture Capital Forum 2019 7
LIQUIDITY OPTIONS ARE BROADENING The expansion of the private equity asset class creates new exit dynamics • 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 Page 8 | Invest Europe Venture Capital Forum 2019 8
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