from start-up to scale-up: comparing us, canada and europe · number of ipos in us & europe...
TRANSCRIPT
From Start-up to Scale-up:
Comparing US, Canada and Europe
THOMAS HELLMANN (UNIVERSITY OF OXFORD)
Quebec City Conference
March 10th 2016
1
The start-up revolution - Endangered?
Canada & Europe have come long way
Changing financing landscape for tech starts-ups
Large role of public policy support for start-ups
Where is the growth performance?
Next step: Scale-up revolution?
2
What Scale-up Problem?
Focus on growth of start-ups
Focus on innovative / tech start-ups
Focus on role of finance
Scale-up works well in US…
…but not yet in Canada & Europe
3
Requirements for Scale-Up investors
Financial muscle (‘deep pockets’)
Expertise (‘smart money’)
Networks (‘connected money’)
Long horizons (‘patient money’)
VENTURE CAPITAL INVESTMENTS AS % OF GDP
% of
Total VC
Early
stage
Later
stage
US 33% 67%
Canada 56% 44%
UK 48% 52%
EU
(excl. UK) 57% 43%
OECD (2015)
0,00
0,05
0,10
0,15
0,20
0,25
0,30
United States Canada United Kingdom EUX
Seed/start-up/early stage Later stage venture
6
THE SCALE-UP GAP: EU VS US
Ave
rag
e a
mo
un
t in
ve
ste
d (
£m
)
Number of deals (GDP adjusted)
*Adjusted using 2014 GDP Sources: BVCA (2015); NVCA (2015); EVCA (2015); PEREP_Analytics (2015)
Early stage deals Later stage deals
The Role of Foreign Investors in Europe
7
73% 73% 71% 66%
59% 64%
16% 14% 16% 19%
18%
23%
12% 13% 13% 15% 23%
14%
SEED SERIES A SERIES B SERIES C SERIES D SERIES E
% o
f In
ve
sto
rs
Funding Round
Foreign vs. Domestic Investors in EU VC Deals
Domestic Investors US Investors RoW Investors
The Role of Foreign Investors in the UK
8
62%
51% 44%
49% 40%
25%
18%
31%
32%
35%
40%
50%
20% 19% 23%
16% 20% 25%
SEED SERIES A SERIES B SERIES C SERIES D SERIES E
% o
f In
ve
sto
rs
Funding Round
Domestic Investors US Investors RoW Investors
9
1.47
9
20,5
33,8 36,9
38,8
1,3 5,1
8,9
12,3
20,5
30,1
SEED SERIES A SERIES B SERIES C SERIES D SERIES E
Av
g. D
ea
l Siz
e (
$m
n.)
Funding Round
Deal Size of EU VC Deals by Investor
Type
With Foreign Investors Domestic Investors Only
Deals are larger with foreign investors
10
1,4 8,6
16,1
25,3
29,9
35,2
1,9 8,9
19,6
28,1
36,7
48,9
SEED A B C D E
Av
g. In
ve
ste
d A
mo
un
t ($
mn
.)
Funding Round
Average Investment Amounts by Funding Round
EU (Incl. UK) US
EU-US funding gap
widens at later stages
US Funds larger at later stage
Data source: Preqin 11
72,1
131,6 153,9
187,8 191,7 214,1
59,7
172,5
300 325
364 372
SEED A B C D E
Me
dia
n F
un
d S
ize
($
mn
.)
Funding Round
Median Fund Size by Funding Round
EU (Incl. UK) US
How do US funds invest
depending on fund size?
Data source: Preqin
60%
45% 48%
25% 17%
12% 15%
29%
34% 31%
36%
31%
26% 25%
06%
11% 11%
19%
22%
24% 23%
04% 06% 06%
11%
17% 20% 20%
01% 03% 03% 07%
10% 13% 12%
00% 02% 01% 02% 04% 05% 05%
<10MN. 10-25MN. 25-50MN. 50-100MN. 100-250MN. 250-500MN. >500MN.
% o
f In
ve
ste
d R
ou
nd
s
Fund Size Bucket
US Funds
Seed A B C D E
12
13
US Investors fund companies
for more rounds
57%
31%
12%
42%
33%
25%
1 ROUND 2 ROUNDS 3 ROUNDS OR MORE
EU US
14
100,3
143,1 140,2
262,9
153,4
195,4
292,5
482,5
1 ROUND 2 ROUNDS 3 ROUNDS >3 ROUNDS
Av
g. Fu
nd
Siz
e $
mn
.
Sizes of Funds Investing in Multiple Rounds of Same
Deal
EU (Incl. UK) US
Funds that invest in multiple rounds
are larger (especially in the US)
US funds grow larger over time
Data source: Preqin
40 50 54
103 82 93
66 89,9
150
200,1
281
325,4
I II III IV V VI
Me
dia
n F
un
d S
ize
($
mn
.)
EU (Incl. UK) US
15
The rise of government as LP in
European VC
16
0%
20%
40%
60%
80%
100%
120%
2007 2008 2009 2010 2011 2012 2013 2014
Banks Corporate Fund of funds Government Pension funds Private Individuals Other
How many VC backed companies
get venture debt?
17
20%
8.4%
5.4%
US UK EUX
Companies with venture debt also
raise more venture equity
18
43
31
22
17
7,3
1,3
56
35
33
25
9,8
1,4
0 10 20 30 40 50 60
SERIES E
SERIES D
SERIES C
SERIES B
SERIES A
SEED
With debt Withoutdebt
The Crossroad for Scale-Ups 19
IPO
REF
ACQ
END ENTER
Exits of VC backed companies:
Fraction of IPOs
20
Figure 15 IPO Ratio of EVCA and NVCA reported Exits
11
9.1
9.1
17
20
2.8
4.3
0.0
0.0
8.6
1.6
2.0
1.6
1.6
1.9
2010 2011 2012 2013 2014
Ra
tio
(in
%)
Year
US UK EUX
IPOs in US & Europe > $100m (2002-2015) Source: Capital IQ, 2015
The proportion of firms that raise amounts greater than
$100m at IPO is much higher in the US than in Europe
21
Number of IPOs in US & Europe (2002-2015) by market cap (still operating) (logarithmic scale) Source: Capital IQ, 2015
After 2001, the number of IPOs in Europe is comparable to the US
But the proportion of these IPOs that are still independent today and have reached a market cap of $1G is much lower
22
Global Distribution of Unicorns
Asia
20%
Australia
1%
Canada
1%
Europe
11%
India
4%
Isreal
1%
South
America
1%
United
States
61%
Global Distribution by Count
Asia
26%
Australia
1%
Canada
0% Europe
7%
India
5% Isreal
0%
South
America
0%
United
States
61%
Global Distribution by Value
Source: Crunch Base, end of 2015
Case study: Second Markets
2004: Founded with focus to provide private liquidity
2009: Trading boom of private Facebook shares
After that: Refocus on company tender offers
2015: Trading volume of $1.4B
Oct 2015: Acquired by NASDAQ Private Market
24
Can secondary markets be done?
Evidence from buyouts 25
2 2 5
7 7
10
18 20
10
22,5
25 25
27,5
42
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Tra
nsa
ctio
n V
olu
me
($
B)
Year
[i] Source: Greenhill-Cogent Partners “Secondary market trends & Outlook, July 2015”, Capital Dynamics, July 2015.
Acquisitions >$50m (2002-2015) Source: Capital IQ, 2015
The proportion of European firms acquired by US firms is much higher than the reverse
26 Life Sciences Software Hardware
US
Targets
Europe
Targets
US
Targets
Europe
Targets
Europe
Targets
US
Targets
Acquisitions >$50m (2002-2015) Source: Capital IQ, 2015
The proportion of Canadian firms acquired by other
Canadian firms is low
27
Life Sciences Software Hardware
Canada
Targets
Canada
Targets
Canada
Targets