German & Berlin Tech: performance on the international stage 14 November 2018 in partnership with
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How are German & Berlin Tech performing on the international stage? Since 2000s, German tech has created 28 unicorns, with a combined value of 106 billion. Astonishingly, nine of them i.e. one-third became a unicorn (reached $1 billion) in 2018 alone Germany is Europe s second largest tech hub after the UK by almost any metric, including venture capital invested, unicorns created and realised exits. Berlin is Europe s second largest tech hub by the same metrics. Munich ranks third tech hub in Europe by number of unicorns created 4.3 billion is projected to be invested in 2018 in German startups: a new record (based on January to October annualized data) This record-level is driven in part by a handful of mega-rounds, more so than in the UK and France. Already at Seed and Series A stage, German rounds tend to be bigger than in the UK, France and Europe Germany s multinationals are among the most active corporate venture investors in Europe, investing 0.9 billion in European VC rounds (compared with 0.5 billion by UK and French corporates) Investment from USA and Asia into Germany has grown from 0.4 billion in 2016 to 1.8 billion in 2018 3
What can be done to support and accelerate development of the German & Berlin tech industry? Berlin s tech sector emerged without any pre-conceived notion of a startup ecosystem. But X years after the Samwer brothers launched Rocket Internet, we ve entered the age of mega-tech companies, mass adoption of digitization, large investments in artificial intelligence, as well as uncertainty about (e.g. GDPR). Some degree of grand-planning may be inevitable. Plus the risks of disconnect between public and private are larger than ever The objective of this report is not merely to highlight Germany s successes, but rather offer new insights, identifying both strengths and areas for improvement for Berlin s and Germany s tech sector Unicorns are one useful metrics as it reflects a tech hub s ability to support hyper-growth, attract top talent and create a new generation of future founders, executives, and angel investors. This report also looks at investment allocation, cross-border investment flows, talent pools & development This report will function as a starting point for discussions about Germany s and Berlin s tech ecosystem, including a launch event on Wednesday, November 14Dealroom will also unveil a new data resources dedicated to Berlin, to support the local ecosystem and improve data 4
Underlying data is available online via berlin.dealroom.co 5
Contents 1. Startups and unicorns 2. Venture capital investment and exits 3. Tech infrastructure: foundations for growth
28 unicorns were created in Germany in the last ten years, of which 9 (one-third) in 2018 alone Cumulative number of unicorns created (year in which $1 billion valuation mark is crossed) 28 CTS Eventim (05 ) Infineon ( 00) 16 18 19 9 3 3 3 4 4 4 5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1 1 3 3 6 2 1 9 Source: Dealroom.co. Only includes companies founded after 1990. 7
Germany firmly ranks second by number of unicorns, well ahead of Israel, Netherlands, Sweden, France Cumulative number of unicorns created (year in which $1 billion valuation mark is crossed) 60 United Kingdom Room for growth 28 Germany 3 3 3 4 4 4 5 9 16 18 19 13 10 11 7 Israel Netherlands Sweden France 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Dealroom.co. Only includes companies founded after 1990. 8
Germany s unicorns are worth a combined 106 billion, mostly concentrated in Berlin, Munich and Hamburg $10B+ $5-10B $2-5B $1-2B Future unicorns (1) Berlin Munich Hamburg Stuttgart Dusseldorf Source: Dealroom.co. Companies valued 200M to 1B. 9
Germany has created 28 unicorns so far with a promising pipeline of potential unicorns Realised unicorns: 18 Unrealised unicorns: 10 Future unicorns: over 20 IPO-ed or acquired Not exited Companies valued 200M to 800M Source: Dealroom.co. Only includes companies founded after 1990. 10
Still a wide gap versus Silicon Valley and Beijing Current number of unrealised unicorns United States 120 China 75 United Kingdom 15 India Germany 11 10 Israel France South Korea Switzerland South Africa Indonesia 5 4 3 2 2 2 Source: Dealroom.co. 11
Contents 1. Startups and unicorns 2. Venture capital investment and exits 3. Tech infrastructure: foundations for growth
With a projected 4.3 billion invested, 2018 will be a record year for venture capital investment in Germany Annual investment in German VC rounds Top 10 rounds in 2018 City Round Quarter 5.0B Investment (in billions) Number of rounds (> 2M) 4.3B 200 Auto1 Group Provides consumers with access to used and new cars NuCom Group Omnichannel platform for consumer services and lifestyle brands in Europe Berlin Unterföhring 460 m GROWTH EQUITY 3.0B valuation 450 m GROWTH EQUITY 1.8B valuation Q1 Q1 4.0B 160 About You E-commerce retailer for fashion Hamburg $ 300 m GROWTH EQUITY $1.0B valuation Q3 BioNTech Personalized cancer immunotherapies Mainz 225 m SERIES A Q1 3.0B 2.8B 2.9B 120 Number26 Bank account that can be managed entirely from a smartphone Berlin $ 160 m SERIES C Q1 2.0B 1.7B 1.9B 80 GoEuro Multi-mode search tool that compares and combines rail, air, bus and car for European destinations Deposit Solutions The open architecture platform for retail deposits Berlin Hamburg $ 150 m GROWTH EQUITY $1.0B valuation $ 100 m SERIES D Q3 Q2 1.0B 40 Frontier Car Group Builds and runs marketplaces focused on emerging markets in the auto sector Berlin $ 89 m SERIES C Q3 Sonnen GmbH Global leader in smart energy storage solutions Wildpoldsried 60 m LATE VC Q2 2014 2015 2016 2017 2018E Smava Germany's largest online credit market Berlin $ 65 m LATE VC Q1 Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lending capital, grants. 13
Germany ranks second in Europe by venture capital investment activity, in most years including in 2018 Investment (in billions) Number of rounds (> 2M) 10.0B 500 462 8.0B 7.7B 7.1B 400 6.0B 4.0B 2.0B 2.9B 5.3B 5.0B 1.7B 2.8B 1.9B 2.9B 4.3B 172 1.0B 1.7B 2.5B 2.6B 4.0B 330 300 200 100 2014 2015 2016 2017 2018E 2014 2015 2016 2017 2018E 2014 2015 2016 2017 2018E United Kingdom Germany France Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lending capital, grants. 14
German mega rounds have had a big impact on the large amount of capital invested in 2018 Venture capital investment in Germany by round size 5.0B 4.3B $150M $495M 4.0B 3.0B 2.8B 2.9B $ 100M+ $506M $89M 2.0B 0.8B $ 50-100M 2.0B 1.9B 0.5B 1.7B 1.2B 0.4B 0.3B 0.4B $ 25-50M 0.4B 0.9B 0.5B 1.0B 0.1B $ 10-25M 0.1B $160M $100M $ 0-10M 2013 2014 2015 2016 2017 2018E $300M $250M Source: Dealroom.co. Excludes buyouts, secondary transactions, debt. 15
Mega rounds represent a larger share of German venture capital invested than in the UK and France United Kingdom 50M+ rounds = 40% of capital Venture capital investment by round size Germany 50M+ rounds = 60% of capital France 50M+ rounds = 30% of capital 10.0B 8.0B 7.7B 7.1B $ 100M+ 6.0B 5.3B $ 50-100M $ 25-50M 4.0B 2.0B 1.6B 2.9B 5.0B 4.3B 2.8B 2.9B 1.7B 1.9B 0.9B 4.0B 3.3B 2.5B 2.6B 1.7B 0.8B 1.0B $ 10-25M $ 0-10M 2013 2014 2015 2016 2017 2018E 2013 2014 2015 2016 2017 2018E 2013 2014 2015 2016 2017 2018E 2018 Source: Dealroom.co. Excludes buyouts, secondary transactions, debt. 16
Already at Seed and Series A stage, German rounds tend to be bigger than in the UK, France and Europe Median size of Seed rounds Median size of Series A rounds 1.5M 9M 1.2M 1.3M 8M 8M 1.1M 1.0M 7M 7M 0.9M 0.6M 0.8M 6M 5M 6M 6M 0.3M 4M 3M 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 United Kingdom Seed Germany Seed United Kingdom Series A Germany Series A France Seed Europe Seed France Series A Europe Series A Source: Dealroom.co 17
Investment focus in Germany has now moved from Food towards Fintech and Transportation / Mobility From 2013 to 2016 From 2017 to 2018 Europe Germany Europe Germany Food 5% 24% Food 4% 7% Enterprise software 15% 12% Enterprise software 15% 13% Home 5% 10% Home 5% 5% Health 16% 10% Health 17% 11% Fintech 12% 10% Fintech 15% 16% Transportation 5% 6% Transportation 7% 18% Biotech 10% 5% Biotech 10% 5% Marketing 8% 5% Marketing 4% 4% Fashion 4% 5% Fashion 3% 5% Travel 3% 5% Travel 3% 5% Energy 5% 4% Energy 5% 6% Security 5% 3% Security 4% 1% Gaming 2% 2% Gaming 2% 0% Insurance 1% 1% Insurance 2% 3% Telecom 3% 1% Telecom 2% 0% Robotics 1% 0% Robotics 1% 1% Semiconductors 1% 0% Semiconductors 1% 1% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% Source: Dealroom.co. Excludes buyouts, secondary transactions, debt. 18
The UK, Germany and France together account for 57% of total European venture capital investment Venture capital funding by company location in 2018 YTD (Year to date from January to October) United Kingdom Germany France Israel Spain Sweden Switzerland Ireland Netherlands Finland Denmark Portugal Italy Belgium Russia Norway Estonia Cyprus Austria 0.6B 0.5B 0.4B 0.4B 0.4B 0.4B 0.3B 0.3B 0.2B 0.2B 0.1B 0.1B 0.9B 0.9B 1.3B 2.4B 3.3B 3.6B 5.9B Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lending capital, grants. 19
German investors invest 29% of rounds and 48% of capital outside of Germany (25% and 42% outside of DACH region) Allocation by invested capital (2017-2018) Germany Israel United Kingdom Sweden France Austria Switzerland Spain Belgium 4% 3% 3% 3% 2% 1% 10% 12% 52% Norway 0.3M 1 round Sweden 0.1B 18 rounds Finland 16M 10 rounds Allocation by number of rounds (2017-2018) UK 0.3B 110 rounds Poland 12M 7 rounds Germany United Kingdom France Switzerland Israel Austria Netherlands Spain Sweden 8% 4% 3% 2% 2% 2% 2% 1% 71% Spain 0.3B 21 rounds France 0.1B 52 rounds Switzerland 0.1B 35 rounds Austria 0.1B 24 rounds Israel 0.4B 28 rounds Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lending capital, grants. 20
Venture returns are mostly driven by few very large exits. Germany s realised exits add up to 29B, since 2013 Value of realised exits (2013-2018) Additional unrealised value of 15B 29B of realised exits (2013-2018) 7.1B 8.1B 7.9B 4.1B 1.1B 1.1B 14B of invested capital (2013-2018) ( 0.9B) ( 1.7B) ( 1.9B) ( 2.8B) ( 2.9B) ( 4.3B) 2013 2014 2015 2016 2017 2018E Source: Dealroom.co 21
UK, Germany and Sweden are leading Europe in terms of realised exits for venture investors Invested capital ( 13-18) Value of realised exits ( 13-18) Selected landmark exits United Kingdom ( 29B) 92B Sweden ( 6B) 35B Germany ( 15B) 29B Netherlands ( 3B) 21B Finland ( 2B) 13B France ( 13B) 12B Source: Dealroom.co. Total value of exits of all companies that have been venture backed at any stage in their life cycle. 22
Contents 1. Startups and unicorns 2. Venture capital investment and exits 3. Tech infrastructure: foundations for growth
Berlin is home to several of the most prominent venture capital investors in Europe INVESTOR LOCATION LAST FUND FOCUS NOTABLE INVESTMENTS DACH RANK (1) HV Holtzbrinck Ventures Munich / Berlin 306M Jan 2018 Seed, series A 1 st Lakestar Zurich / Berlin 350M Aug 2016 Seed, series A 2 nd Rocket Internet / Global Founders Capital Berlin 1.0B Jan 2017 Multi-stage 3 rd Point Nine Capital Berlin 75M Jun 2017 Seed 4 th Target Global Berlin $ 100M Jun 2018 Multi-stage 5 th Earlybird Venture Capital Berlin 175M Jun 2018 Seed, Series A 6 th Tengelmann Ventures Mülheim -- Multi-stage 7 th Cherry Ventures Berlin 150M May 2016 Seed 8 th Project A Ventures Berlin 50M Jan 2018 Seed, series A 9 th Speedinvest Vienna 50M Jan 2018 Seed 10 th Source: Dealroom.co. 1. Prominence rank of German investors, based on Dealroom s Prominence Rank which measures activity and investment success. 24
German world-leading multinationals are Europe s most active corporate venture investors European corporate venture investments by location of corporate Media Automotive Industrial Investment (in billions) Number of rounds (> 2M) 1.0B 200 0.9B 0.8B 0.7B 160 0.6B 0.4B 0.2B 0.2B 0.2B 0.2B 0.4B 0.2B 0.2B 0.3B 0.5B 0.4B 0.3B 0.3B 0.5B 120 80 40 Finance Retail & distribution Technology 0.1B 2014 2015 2016 2017 2018E 2014 2015 2016 2017 2018E 2014 2015 2016 2017 2018E Germany United Kingdom France Source: Dealroom.co. Excludes buyouts, secondary transactions, debt. 25
German funds make 25% of investments abroad, in line with the UK. German corporates invest nearly half abroad VC funds: % cross-border investment Corporates: % cross-border investment German VCs UK France German corporates UK France 29% 22% 19% 29% 25% 43% 35% 35% 46% 32% 10% 17% 2014 2016 2018E 2014 2016 2018E Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lending capital, grants. 26
Selected investments and acquisitions by German corporates Investors Company Location Round Date USA $ 8.0 b ACQUISITION Nov 2018 Netherlands 2.8 b ACQUISITION Aug 2015 Indonesia $ 1.5 b SERIES E Jan 2018 Netherlands 628 m ACQUISITION Aug 2018 Germany $ 300 m GROWTH EQUITY Jul 2018 UAE $ 150 m SERIES D Jun 2017 USA $ 100 m SERIES A Mar 2018 Israel/USA $ 80.0 m LATE VC Jun 2018 Germany 70.0 m ACQUISITION Apr 2018 USA ACQUISITION Oct 2018 Source: Dealroom.co. 27
Investor appetite in German tech has increased dramatically, especially from the USA & Asia (plus South African Naspers) Investment into Germany from USA, Asia and Africa USA and Canada Asia Africa 2.0B 1.8B 1.6B 1.2B 1.1B 0.8B 0.4B 0.4B 0.6B 0.4B 2014 2015 2016 2017 2018 Source: Dealroom.co. Excludes buyouts, secondary transactions, debt. 28
Top universities City Top universities Highest ranked university (1) Oxford University of Oxford 1 Cambridge University of Cambridge 2 London Imperial College London*, UCL, London School of Economics and Political Science, King s College London 8 Munich LMU Munich*, Technical University of Munich 32 Manchester University of Manchester*, Manchester Metropolitan University 54 Amsterdam University of Amsterdam*, Vrije Universiteit Amsterdam, 59 Berlin Humboldt University of Berlin*, Free University of Berlin, Technical University of Berlin 62 Paris Paris Sciences et Lettres - PSL Research University Paris*, Ecole Polytechnique, Pierre and Marie Curie University 72 Copenhagen University of Copenhagen*, Copenhagen Business School 116 Barcelona Pompeu Fabra University*, Autonomous University of Barcelona, University of Barcelona 135 Hamburg University of Hamburg*, Hamburg University of Technology 135 Stuttgart University of Stuttgart*, University of Hohenheim 89 Stockholm Karolinska Institute*, Stockholm University, KTH Royal Institute of Technology 153 Madrid Autonomous University of Madrid*, Complutense University of Madrid, Carlos III University of Madrid 351 University rank as per Times Higher Education. *Highest ranked university per city 29
Germany has one of Europe s largest talent pools of professional developers Number of professional developers Destinations of choice for tech talent Germany 837 United Kingdom 22% United Kingdom 814 Germany 14% France 467 France 9% Netherlands 310 Netherlands 7% Spain 268 Spain 7% Sweden 176 Switzerland 4% Switzerland 144 Sweden 3% Source: Atomico s State of European Tech 2017; SpeedInvest s Startup & venture Capital Landscape in DACH 2018. 30
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