European VC's stellar decade drives unicorn stampede

February 10, 2020
The past decade has seen Europe's venture capital ecosystem go from a nascent market to a full-fledged industry. By the end of 2019, there were 40 European startups with a valuation of more than $1 billion, according to PitchBook data. 14 of those startups became unicorns last year.

A surge in venture capital activity has led to the birth of these billion-dollar companies. Last year saw VCs back European startups with a record €32.4 billion (around $35.5 billion), according to PitchBook's 2019 Annual European Venture Report. Not only did this surpass 2018's peak of €24.3 billion, but it also represented an increase of 620% from 2009's total.

German fintech provider N26 was the first company to cross into unicorn territory in 2019, with a $300 million round in January. A July extension of that round brought N26 to a $3.5 billion valuation.

While Germany comprises a large chunk of Europe's unicorn stable—insurtech startup Wefox and low-cost coach operator FlixMobility also breached the 10-figure valuation last year—the majority of the continent's unicorns are based in the UK. Medtech businesses CMR Surgical and Babylon Health and fintech startup Rapyd were among the six new British unicorns.

The unicorn stampede is being driven by a surge in mega-deals, which in turn has been driven by a glut of capital. European startups brought in a total of €8.58 billion across 40 deals of €100 million or more in 2019—nearly tripling 2018's €3.16 billion of mega-deals, according to PitchBook data. The number of VC-backed transactions, however, has been on the decline—sliding from 5,929 deals in 2018 to 5,017 last year—showing that the ever-increasing pool of money is being distributed across less transactions.

VC investors, in contrast, aren't reaping the same benefits as startups from this newfound exuberance. Exit levels for VC-backed companies hit their lowest point since 2013, exiting €14.7 billion via 472 deals, according to PitchBook data. The previous year saw a whopping €52.9 billion in exit value, but with big exits like Swedish audio-streaming giant Spotify's direct listing and Dutch payments provider Adyen's IPO accounting for a large chunk of that total. IPOs, in particular, took a hit in 2019: Swiss biotech startup ADC Therapeutics canceled its listing in October amid the WeWork fiasco and the poor performances of Uber, Peloton and others.

A low interest rate environment and an abundance of dry powder—some $25 billion—has resulted in startups being priced for perfection. With more capital chasing fewer deals, startups that otherwise may not have been funded, at least at their current valuation, are receiving investments. And with European VC dealmaking showing no signs of slowing, the region's unicorn stable is only set to grow.

Below is a map illustrating European countries' most valuable unicorns, as well as the most valuable VC-backed startup in those which do not yet possess a billion-dollar company. Hover over any of the countries on the map to see the current valuation and headquarters:

Featured image via pishit/iStock/Getty Images Plus

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