Published on January 11, 2016
1. Analysis of 2015 venture investment activity in Swedish private tech companies Industrifonden Swedish Tech Funding Report 2015
2. 2 Industrifonden is a Swedish venture capital fund, investing in early-stage tech and life science growth companies. Founded in 1979, Industrifonden is a reinvesting evergreen fund with SEK 4 billion (~$480M) in assets. About Industrifonden. industrifonden.com @industrifonden /company/industrifonden Copyright Industrifonden
3. 3 With 2015 in the books, we look back on a year where the Swedish startup scene truly consolidated its position as a force to be reckoned with. 2015 saw countless publications naming Sweden the new startup center and records were broken over and over again. As always, building a global company requires deep pockets and 2015 saw a massive influx of venture capital to Swedish tech companies looking to do just that. In the wake of negative interest rates combined with a number of high profile tech startups reaching unicorn status, asset managers from all sectors and geographies turned to tech companies in search of returns. Adding to this, a number of large venture funds aiming to cover the Nordic tech scene launched during the year, resulting in more capital invested and more deals per capita than the rest of Europe’s top performing countries. The last quarter of the year did show a cool-down in terms of larger funding rounds, while the high levels of smaller rounds seen in Q2 and Q3 remained and even increased further. Companies in the seed stage had a range of investors to choose from – it was rather the later- stage companies that could experience difficulties in raising their next round. Whether this was just a small hiccup or a response to soaring valuations in the tech sector combined with general apprehension in capital markets following increased volatility will be determined in the first half of 2016. The year ended with a total of $1.1 billion invested across 175 disclosed funding rounds. More than 250 investors participated in funding Swedish tech startups. The majority of the deals were made by local angel investors and VC firms. Summary. Copyright Industrifonden Note: This report only covers investment activity, not exits. Therefore, the terms ‘deal’ and ‘funding round’ are used interchangeably throughout the report.
4. 4 Q4 Highlights Copyright Industrifonden
5. 5 Q4 brought a record number of disclosed investments, but also a notable shift towards smaller rounds. Q4 saw 30 percent more funding rounds compared to Q3 and the quarter accounted for 35 percent of all disclosed deals in 2015. However, the investment sizes plunged with an average Q4 funding round size of $1.9M. This is a significant decrease, indicating a 65 percent drop compared to the average Q3 funding round. Noteworthy is that it was not just the increase in smaller funding rounds that pushed down Q4 averages. Looking at the top five largest deals for each quarter, Q4 is at the very bottom in terms of deal sizes. Q4 is also at the bottom in terms of median deal sizes, with a median round of $0.7M – half the size of the Q2 median of $1.4M but closer to the Q3 median round of $0.8M. As total deal count shows, it is clear that interest in the Swedish tech scene remains at record-high levels. The clear decrease of larger deals in Q4 is noteworthy however, as it could be a first indication of a gap in expectations between founders and institutional investors following soaring valuations throughout the year. Q4: More deals, less cash 0 10 20 30 40 50 60 70 Q1 Q2 Q3 Q4 Increasing number of deals…Deal count 0% 10% 20% 30% 40% 50% 60% 70% Q1 Q2 Q3 Q4 …but less capital raised compared to Q2-Q3% of total Copyright Industrifonden
6. 6 2015: The juggernaut year Copyright Industrifonden
7. 7 $1.1B(SEK 9.4B) raised during 2015 175Funding rounds $1MMedian deal size 2011Median year a company that received investment during 2015 was founded 57%Increase in mentions of ’startup’ or ’start-up’ in Swedish media compared to 2014 Source: Industrifonden database, Dow Jones EMEA Venture Capital Report, Dealroom.co, Retriever 1.7xCapital invested per capita in Swedish tech startups 2015 compared to the UK Copyright Industrifonden
8. 8 250Active investors during 2015 50Investors made at least two investments Investor type by % of deals Angel investor VC Investment firm, other Corporation Corporate VC Accelerator 45% 37% 6% 6% 3% 3% Business angels and VCs remain crucial to the funding landscape, participating in over 80% of deals Copyright Industrifonden
9. 9 60% Top 20 most active investors involved in 60% of all deals Top 20 funding rounds make up 80% of total disclosed deal value 80% Top 20 funding rounds as % of total deal value Top 20 most active investors’ deal count as % of total deal count Copyright Industrifonden 2015 Copyright Industrifonden
10. 10 Quarterly breakdown: Increasing total deal count quarter-over-quarter, but fewer large funding rounds Note: The inflated average (mean) deal size in Q2 2015 is mainly due to Spotify’s >$500m Series G financing Deal count$M Deal count 0 10 20 30 40 50 60 70 0 2 4 6 8 10 12 14 16 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Average deal size Median deal size Deal count 0 5 10 15 20 25 30 35 Q1 2015 Q2 2015 Q3 2015 Q4 2015 ≤$1M $1.1 - 5M $5.1-25M >$25M Copyright Industrifonden
11. 11 Finance, Media, and SaaS most popular verticals by number of funding rounds Top 3 verticals by deal count 12% 11% 11% Note: Deal count as percentage of total Software-as-a-Service (SaaS)MediaTechFinTech Copyright Industrifonden
12. 12 The international context Copyright Industrifonden
13. 13 Foreign investors active in later stages – founders rely on local investors for launch and early growth Average share of funding rounds with foreign participation 2015 Foreign investors by country USA UK Rest of World Germany Denmark Finland 32% 33% 25% 19% 10% 7% 6% 0 10 20 30 40 50 60 70 80 90 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ≤$1M $1.1 - 5M $5.1 - 25M >$25M Funding rounds with foreign participation Foreign participation % Total deal count Deal count Deal size Copyright Industrifonden
14. 14 Sweden ranks #1 in invested capital and deals per capita compared to peers 0 20 40 60 80 100 120 Sweden UK Germany France $ raised per capita Q1-Q4 2015 0,000000 0,000002 0,000004 0,000006 0,000008 0,000010 0,000012 0,000014 Sweden UK France Germany Deals per capita Q1-Q3 2015 Source: Industrifonden database, Dow Jones EMEA Venture Capital Reports 1Q-3Q 2015, Dealroom.co. Note: UK, France and Germany ranked top three in Europe on deal count and capital raised. Data for amount raised for UK, Germany and France calculated as average of Dow Jones’ and Dealroom’s data for Q1-Q3 and Dealroom’s for Q4. Data for number of deals for UK, France and Germany: Dow Jones. Differences in data collection methods and level of completeness may impact the comparison Copyright Industrifonden
15. 15 What’s included • This report covers disclosed venture investments in Swedish private tech companies • Analysis primarily based on proprietary database with 175 funding rounds from 2015, sorted on date of disclosure • 10+ parameters including deal size, stage, investors and vertical • Both first-time and follow-on investments • Deals are tracked in SEK. If originally reported in other currencies, conversion is based upon exchange rate per date of disclosure. Aggregate figures are subject to change due to currency fluctuation What’s not included • Investments in life science, med tech, bio tech, retail, and consulting • Secondary investments and M&A deals • Investments in public companies of any kind • Grants, bank loans and other types of funding that is not intended to result in ownership For more information, contact: Björn Bergström, firstname.lastname@example.org The information contained in this report has not been independently verified as to its accuracy. No representation or warranty, express or implied, is given by Industrifonden or any of its directors, partners, officers, affiliates, employees, advisers or agents as to the accuracy or completeness of the contents of this report or any other document or information supplied or any opinions or projections expressed herein or therein, nor is any such party under any obligation to update the report or correct any inaccuracies or omissions in it which may exist or become apparent. Methodology Copyright Industrifonden
16. Stay in touch. industrifonden.com @industrifonden /company/industrifonden
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