The European Unicorn

GP Bullhound

Not just a myth, Europe is catching up to the US when it comes not just to entrepreneurship, but those mythical companies valued at over $1 billion.


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For the first time European companies have the capital to rival US companies; and it shows. According to a report from GP Bullhound, this past year there have been 40 companies valued one billion dollar plus (unicorns) in Europe. In 2014, there were only 30 unicorns, with 13 breaking the billion dollar valuation mark this year, and three falling below it. These “European Unicorns,” are growing stronger as new capital flows in and bolsters an emerging consumer market ripe for growth. Unicorns enjoyed an increase in the average investment size, with the total invested growing from $2.8 billion in 2014 for 30 transaction, to $5.6 billion in 2015 for 46. IPOs are also launching with much higher valuation than in previous years.

The Unicorns’ success

When digging into the success of these “Unicorns” it can be seen that the leading countries for the creation of multi billion dollar enterprises are the UK, Sweden, and Germany and that financial technology and software are the largest growing industries and London’s unique position in global finance is helping to drive growth in Europe.

Unicorn chart

These companies are also started by those in their 30s, with 58% of total unicorn founders doing so being between 30 and 40 years of age. Only 19% of Unicorns had founders age 40 or older, indicating that founding a billion dollar company does seem to favor those in their early to middle parts of their career.

Another key component is to keep as much of the founding team intact. 52 percent of unicorns still have all founders in the business, 35% have at least one of them, and only 13% had none of the original founders still in the business. Continuity is key, and maintaining an innovative culture that sticks to its values as a start up can be seen as an important component. That being said, the 2014 average of 8.5 years to a liquidity event is down to 8 years in 2015, and signifies that European companies are growing, monetizing and expanding to new markets at faster and faster rates. The amount of money has gone up as well, with seven separate billion dollar transactions occurring in 2015 as opposed to four in 2014.

Age of unicorn founders

However, it is important to remember that building a unicorn requires a tremendous amount of time and investment. The average investment in a unicorn was 140 million, and consumer companies (majority of Europe’s unicorns) require a significantly higher amount of investment with about 246 million on average. Moreover, syndicates are crucial in Europe, as the majority of unicorns attained their funding from 5 to 8 different institutional investors to date. Spotify is at the top of this spectrum, with about 17 investors total and King had only 2 syndicate investors. However, the important factor thing to keep in mind is that at one point or another an aspiring unicorn will need to attain capital from outside sources.

The next step for Europe, is going to be capitalizing on its success thus far and continuing to drive the value of European unicorns even higher. Currently the cumulative value of European unicorns is 120 billion, which is less than the 230 billion of Facebook and the 737 million of Apple. However, with capital on the rise now is the opportunity for Europe to capitalize on its surge in innovative products and help to promote entrepreneurship in Europe.

Europe vs US

BlaBlaCar, one of Europe’s newest and most successful unicorns recently raised nearly 200 million on a 1.6 billion dollar valuation, and is now ready to take off as their founders visit Silicon Valley for the first time next week. When asked about their recent success CEO Frédéric Mazzella commented:

It has been exhilarating to see our vision resonate with so many people globally, as BlaBlaCar’s community has rapidly scaled and flourished in every new market. We’ve built a unique activity based on the values of true sharing, and this funding will help unleash even more of its potential over the coming years

BlaBlaCar, with its trusted ridesharing service, was nurtured and fostered in Europe and is now beginning to expand into new markets. Currently, they are expanding successfully in India and Mexico and are setting their sights on Brazil. No word yet on whether they will expand to the United States, but Asia and Latin America are plenty big enough for BlaBlaCar to expand into and continue their fast growth.

BlaBlaCar, Spotify, Shazam, and Rocket Internet are all taking advantage of  the continued spread of internet access around the world and combining it with a significant increases in European capital. While the U.S has 22 unicorns this year compared to Europe’s 13 there is no reason to believe that the growth will slow down anytime soon. Europe has the opportunity to establish a unique foothold as a good feeding ground for future “unicorns” and to challenge the U.S and Silicon Valley for entrepreneurial supremacy. As long as these aspiring unicorns can keep finding the funding that they need, there is no reason to think that a few new stars will be born in Europe in the future.

Claudio Alvarez, Director of GP Bullhound presented the report entitled ‘European Unicorns: Do they have legs’, at New Europe’s and AT&T’s first in the series of EnoTechTalks on Thursday September 17.

 

 

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