European Innovation Financing Six-Month Update - H1 2014

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1 PARIS LONDON BERLIN In collaboration with European Innovation Financing Six-Month Update - H CONTRIBUTORS About Clipperton Finance Thibaut Revel Partner Clipperton is a leading European corporate finance boutique exclusively dedicated to the High Tech and Media industries. Clipperton advises high growth companies on financial transactions, fundraisings, or Mergers and Acquisitions. With teams based in London, Berlin and Paris and an international reach, Clipperton is a recognized leader in the sector. Augustin Blanchard Vice-President Antoine Ganancia Senior Associate Martin Vielle Associate About Digimind and WhoGotFunded.com Digimind is a SaaS intelligence software company based in Paris, Boston and Singapore, providing advanced information management platforms and technologies that perform massive data collection, automatic intelligence extraction and visualisation. Using its unique web mining expertise, Digimind developed WhoGotFunded.com, the world's most comprehensive funding database, discovering over 100 fresh funding deals every day in real time all across the world.

2 Strong acceleration in Europe - Innovation Financing is back to record levels driven mostly by Internet deals HEADLINES The record $2.0 billion of investment value in evidences the post-lehman crisis recovery is now robust and well under way. Driven by record-high NASDAQ valuations and positive tech IPO news flow both in the US and in Europe (e.g. JustEat in London), European tech companies attracted high level of investment in the first semester ($3.4 Strong growth of investment level in Europe: +17% in H vs. H1 2013, primarily due to a strong Q2 (+29% in value vs. Q2 2013) billion). This clear acceleration is spurred by (i) Internet deals with star companies Internet and New Media accounts for a record 46% of innovation financing in H1 2014, up by 51% vs. last year inking $50m+ financings and (ii) continuing strength of Life Science PE financing (despite strong activity in IPO/ public capital markets in H1). Following the recent wave of billion dollar exits from several European tech companies in the software and Internet segments - Criteo, King.com, Supercell, JustEat (...) - investors are increasingly bullish on the next Momentum felt at all stages of investments, both growth equity and venture wave of European champions in waiting. The most striking trend is the interest from US tech investors for these European champions: a significant share of the top Internet deals were led by US investors such as Insight Venture Partners (), Sequoia Capital (Klarna), the Chernin Group (Soundcloud), Battery Ventures (FTBpro). The recent $100m investment by Tier-1 European fund Index Ventures in French car-sharing company Blablacar (announced in early July hence not accounted in this H1 report) is another sign that investors believe global champions can emerge from Europe, even in US-dominated segments like C2C sharing platforms. The UK keeps leading the race: about 30% of invested capital in innovation goes to UK-based companies. The Nordics also post a strong performance Confirmed trend: US growth investors are back in Europe: nearly half of deals >$15m (47%) were led by US investors Contents Introduction...p.2 Innovation Financing Overview...p.3 Geographical and Sectorial Views...p.4 Top Deals by Geography...p.5 Top Deals by Sector...p.6 Methodology & Disclaimer...p.7 2

3 A record quarter for European Financing with $2 billion being invested in European start-ups in I n a record quarter for European Innovation Financing, investors poured in $2 billion in European start-ups in, up by 39% from the previous quarter and marking a fourth quarter of consecutive growth. Overall, the first half of 2014 has been strong with an acceleration of VC financing: 385 deals were announced and the total amount raised increased by 17% from $2.9 billion in H to $3.4 billion in H Acceleration rounds (>$30m) come out as clear winners in H1 with a whopping 66% y-o-y increase. The largest rounds of funding were driven by e-commerce start-ups: with Germany s (online food delivery) leading the pack with $173m in fresh money (2 rounds led by Insight Venture and Luxor Capital, a large New-York based hedge fund), followed by Ozon (the Russian Amazon ) raising $150m from a pool of strategic Russian investors, and Paris-based shoe e-retailer Sarenza grabbing $98m in a round led by HLD. Sweden s Klarna also secured its place in spotlight thanks to its large $119m financing with US-based VCs (Sequoia Capital, General Atlantic) & London-based Atomico Ventures. Altogether, the Top 5 funding deals account for 18% of all VC capital invested in H The only damper in the picture is the relative lack of mega-deals : compared to the US market, the top European fundings pale in comparison to Uber s recent $1.2 billion cash injection or Airbnb s $450m round in April Top 5 European Fundings (H1 2014) $88m+$85m DE Ozon RU $150m E-commerce Klarna SE $119m Online Payment FR $98m E-commerce DE $76m Pharmaceuticals Sarenza Glycotope TOTAL INVESTED IN EUROPE Q to $1,996m $1,550m $1,375m $1,433m $975m $1,265m $488m $476m $899m $1,501m $307m $1,062m $626m $797m $959m $807m $705m $1,021m Q Q Q Q Food Delivery Deals equal or below $30m Deals above $30m Strong acceleration of the number of Series A/B rounds in A bout 71% of VC dollars invested in Europe in H were used to finance later stage rounds (>$10 million), dwarfing smaller deals in value although deals below $10m account for almost 82% of all deals done in the first half of The number of rounds in the $1-10 million segment is also off the charts with 144 deals closed in or a 44% increase from. This trend shows the growing appetite of VCs for A and B-rounds a positive sign for the European technology economy s health. The median deal size continues on its upward trend at around $3m after a noticeable 20% year-on-year jump in (also observed in US VC financing). The record infusion of cash in has been partly offset by the increasing number of deals in causing the median deal size to remain stable. DISTRIBUTION BY ROUND SIZE - VOLUME and MEDIAN DEAL VALUE Q to $3.0m $2.8m $2.2m <= $1m $2.8m $2.6m $2.5m 28 $1-5m $5-10m $10-30m 9 $2.0m 16 > $30m Q Q Q Q Q

4 INVESTMENT AREAS The UK still is the #1 destination for Innovation Financing in Europe H T he UK experienced a strong H1 with growth both in volume and value vs. the same period last year (+9% and +23% respectively). All in all, the region attracted 26% of innovation financing money ($902m) spread across 128 deals (33%). This momentum continues into (+43% vs. in value) NORDICS $371m $531m 8 11 $56m $180m(2) The Nordics posted a solid semester: $560m was invested in the region (+81% vs H1 last year) and 44 deals (+33%). Noticeably, 4 Nordic-based companies received funding above $50m: Klarna ($119m), Tradeshift ($75m), Eliademy (), and izettle ($56m). * Announced in July Not accounted for in H1 24 $323m $237m The DACH region occupies second place in H1 with $789m invested, despite a slight drop in investment value in Q2 vs. Q1 (-8%) which can be explained by the scarcity of mega fundings (4 deals above $50m in Q1 vs. only 1 in Q2). Innovation financing in France showed mixed trends over H After a very weak Q1 (30 deals - $110m invested), the country caught-up with the DACH region in Q2, attracting $373m and accounting for nearly 19% of the total amount invested in Europe. The volume of deals more than doubled with 67 transactions. In particular, large fundings seem to be back with Sarenza s $98m funding and the recently announced $100m investment in car sharing platform Blablacar* from Index Ventures alongside historical investor Accel. Both deals are the first three-digit million deals in France since Deezer s $130m back in $46m $188m(1) UNITEDKINGDOM DACH BENELUX FRANCE EASTERN EUROPE $411m $378m $110m $373m OTHER COUNTRIES (Spain, Portugal, Italy, Ireland, Southern Europe) (1) Includes the $150m investment in Ozon 10 deals 13 deals (2) Includes the $50m investment in Avantium Technlogies and the $70m investment in Elasticsearch IT investments account for nearly three quarters of innovation financing in Europe SECTORIAL BREAKDOWN - VALUE H I T companies exhibited strong momentum in H1, with over $2.5 billion poured into the sector. This represents an increase of 30% vs. H and 40% vs. H The sector grabbed 73% of the total amount invested in H1 and 79% of the deal volume. Within the IT sector, the Internet and New Media segment grew by 51% vs. H1 last year ($1.6B invested deals) driven by a series of large fundings (, Soundcloud in Q1 -, Ozon, Sarenza, Eliademy and Farfetch in Q2). Business Cloud and Software start-ups also posted a strong growth over the period (+40% vs. H in value), with $772m invested in the segment. Life Science Cleantech still accounts for a limited portion of overall innovation financing (4%). $147m was invested in the sector, across 19 deals, despite a significant increase in Q2 vs. Q1 driven by a few landmark deals: Amsterdam-based Avantium (new plastic materials) attracted $50m from several Tier-1 strategics, while France-based Leosphere (LIDAR technologies for atmospheric observation) and Nenuphar (wind turbine technologies) received $26m and $20m respectively. Cleantech 4% 23% $3,429m IT Partly as a consequence of the strong performance of IT financing, the Life Science sector saw its weight in European innnovation financing slide to 23% (vs. 29% in H2 2013, back at a similar level as H1 2013). However, the value invested in the sector keeps growing on a y-o-y basis with a total of $770m vs. $687m in the same period last year. 73% Hardware / Telecom $2,512m 6% Internet and New Media 63% Business Cloud and Software 31% DEAL SIZES (IT Sector) Median Value Internet and New Media Business Cloud and Software $3.0m $2.6m Hardware Telecom Consumer Electronics $2.6m N/S $116m $108m 4

5 TOP DEALS BY GEOGRAPHY - H Funds in bold are reported to be lead investors UNITED - KINGDOM DACH Farfetch Vitruvian Partners, Conde Nast, Advent, Richard Chen Nucana Biomed $57m Sofinnova Ventures, Sofinnova Partners, Alida, SEP, Morningside Glycotope $76m Eckert Life Science Accelerator, Jossa Arznei Ecommera $41m Dawn Capital, West Coast Capital, Frog, eplanet, WPP, Wti Novimmune Rosetta Capital Worldremit Accel Soundcloud $60m Chernin Group Kymab Gates Foundation, The Wellcome Trust Hellofresh $50m Insight Ventures, Phenomen VC FRANCE $88m + $85m Insight Ventures (January) Luxor Capital Group (April) OTHER COUNTRIES Sarenza $98m HLD, Bpifrance, other private investors Ozon (RU) $150m Sistema, Mobile Telesystems Voluntis $27m Innovation Capital, Bpifrance, Qualcomm Ventures Klarna (SE) $119m Sequoia Capital, General Atlantic, Atomico Leosphere $26m Electranova Capital Tradeshift (DK) $75m Scentan Ventures Lysogene $22m Sofinnova Partners, Bpifrance, Novo Seeds Elasticsearch* (NL) $70m New Enterprise Associates, Index Ventures, Benchmark Capital Synthesio $20m Idinvest Eliademy (FI) Inventure * Elasticsearch was considered a European company despite being headquartered both in the Netherlands and the US MOST ACTIVE FUNDS J ust like for the two semesters of 2013, Index Ventures and High-Tech Grunderfönds ( HTGF ) remained the most active funds in Europe in H with respectively 15 and 13 deals. If HTGF participated mostly in seed and Series-A rounds, UK/Switzerland based Index invested in several $10m+ private placements, such as Elasticsearch ($70m) and Transferwise ($25m), before Blablacar s $100m funding announced in early July. As for French funds, Alven Capital was involved in 10 private placements during the semester including several follow-on investments: in car sharing platform Drivy ($8m round alongside Index Ventures) or in HR solutions provider PeopleDoc ($17m round together with Accel Partners and Kernel Investissements). Partech Ventures was also active during the period with investments in Germany-based online peer-to-peer marketplace Auxmoney ($16m), connected objects communication network operator Sigfox ($19m) or online finance platform Kantox ($8m). Bpifrance - the French public investment arm - participated in 3 of the 5 largest deals in France, i.e. Sarenza s $98m financing, Voluntis $27m funding or Lysogene s $22m round. Also worth highlighting are the investments of US-based VC funds in European start-ups. In particular, Accel Partners participated in 6 transactions in Europe, investing for instance in Lituania-based Vinted ($27m round), British start-up Worldremit () or German mobile gaming company Flaregames ($12m). More generally, several high-profile deals were led by US VCs/PEs such as the two rounds closed by (led by Insight Ventures in January and Luxor Capital Group in April), Klarna s $119m financing which involved Sequoia and General Atlantic, or Elasticsearch s $70m Series-C financing led by New Enterprise Associates. Last, the participation of Russian investors in large funding rounds outside Russia deserves to be pointed out. For instance, Phenomen Ventures invested in two food-related companies - Hellofresh ($50m round) and Foodpanda (20m$ round) - while Inventure led Finland-based ed-tech company Eliademy s financing. 5

6 TOP DEALS BY SECTOR Funds in bold are reported to be lead investors CLEANTECH LIFE SCIENCES IT Klarna $119m Sequoia Capital, General Atlantic, Atomico Ozon $150m Sistema, Mobile Telesystems $88m Insight Venture Sarenza $98m HLD, Bpifrance, other private investors Tradeshift Apps $75m Scentan Ventures $85m Luxor Capital Group Soundclound $60m Chernin Group Elasticsearch* $70m New Enterprise Associates, Index Ventures, Benchmark Ecommera $41m Dawn Capital, West Coast Capital, Frog, eplanet, WPP, Wti Eliademy Inventure Glycotope $76m Eckert Life Science Accelerator, Jossa Arznei Nucana Biomed $57m Sofinnova Ventures, Sofinnova Partners, Alida, SEP, Morningside Novimmune Rosetta Capital Wilson Therapeutics Abingworth, MVM Life Science, HealthCap GC Aesthetics $60m Orbimed, Montreux, Oyster Capital Kymab Gates Foundation, The Welcome Trust AC Immune $21m Historical Investors Anokion $36m Novartis Venture Fund, Novo Ventures, Versant Venture Index Phamaceuticals $20m Neomed Management Voluntis $27m Qualcomm Ventures, Bpifrance, Innovation Capital Econic Technologies $8m Imperial Innovation, Jetstreams Avantium $50m Swire Pacific, The Coca Cola Company, Danone, Alpha Leosphere $26m Electranova Nenuphar $20m Bpifrance, Idinvest, Areva * Elasticsearch was considered a European company despite being headquartered both in the Netherlands and the US FOCUS ON: LIFE SCIENCE O verall, Private Equity funding for European Life Science companies increased by a robust 12% in H vs. H while IPO (1) proceeds soared by more than 300% over the same period reaching 1,096 million, another sign of the buoyant financing activity in the sector. Glycotope's $76 million round was backed by The Strüngmann group, a family firm led by Thomas and Andreas Strüngmann, and Eckert Life Science, a Berlin-based accelerator, to finance Phase IIb trials for a pair of cancer drugs. Paris-based Sofinnova Partners was highly active in this field with several high profile deals including Lysogene, Inotrem and especially Nucana BioMed, in which it had previously invested and tagged along with US sister fund Sofinnova Ventures. GC Aesthetics, a designer of breast implants, received a hefty $60 million to fuel international expansion, new product development and launches. (1) PwC s IPO Watch Europe Survey 56

7 METHODOLOGY T his report is based on collaborative work and research performed by Digimind and Clipperton Finance. Based on Digimind s WhoGotFunded comprehensive financing deals database which is built in real-time through text-mining technologies, the analysis is focused on European deals with the following characteristics: - Investments completed in a European company (Russia included/ Israel excluded) - The company is considered innovative i.e. with a clear technology or business model innovation which excludes companies who operate technologies that they have not developed (e.g. wind turbine operators are out, while wind turbine equipment designers are in ) - Investments higher than $500k, in order to exclude friends & family seed rounds - Secondary deals (i.e. minority sales of shares to private funds) are included, majority deals are excluded. - Fundraisings through public markets (IPO or public equity financing) are excluded This represents a list of about deals per quarter, which are then allocated to an innovation universe (IT / Life Science / Cleantech) and to a sub-segment (e.g. Consumer Internet within IT). DISCLAIMER T his document has been prepared by Clipperton Finance in collaboration with Digimind. It is communicated solely for the purpose of information and should not be construed as a sollication or an offer to buy or sell any security or related financial instrument. This publication is based of data and information made available to the public and other sources deemed reliable. While efforts have been made to garantee maximum exactitude and reliability, neither Clipperton nor Digimind can be held responsible for omission or errors. The information and analysis accessible in this publication highlight industry trends in general, and should not be construed as providing any particular recommendations or analysis for any specific company that is mentioned in the publication. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein and, accordingly, none of Clipperton s or Digimind s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. Clipperton Finance Limited is authorised and regulated by the Financial Conduct Authority. Registered No CONTACTS 10 rue du Mont-Thabor PARIS Green Park House 15 Stratton Street W1J 8LQ LONDON Neue Schönhauser Str BERLIN Thibaut REVEL Augustin BLANCHARD Partner Vice-President trevel@clipperton.net ablanchard@clipperton.net Antoine GANANCIA Martin VIELLE Senior Associate Associate aganancia@clipperton.net 66 avenue des Champs-Elysées PARIS mvielle@clipperton.net 7