Unicorn Fever – But Who Is Benefiting From Europe’s Startup Investment Boom?


The European tech ecosystem is now worth more than  $800 billion, with almost 50 percent of that value created in the last year, according to a report published in July by investment and advisory firm, GP Bullhound – no mean feat in the midst of a pandemic. 

But to be honest, news of yet another spike in tech sector investment doesn’t really come as a surprise. Over the past few years or so, we’ve all become accustomed to a narrative of ever-increasing sums being directed towards Europe’s innovation economy by VCs and angels. But it has been a narrative with a degree of nuance. These days we hear a lot more about “mega-deals” as both local and global investors focus on later-stage funding sounds. Seed finance has been healthy too, but there are continuing doubts about the availability of capital for businesses sitting in the middle reaches of the funding escalator.   

So when I spoke to  Manish Madhvani – a co-founder of GP Bullhound – I was keen to talk about the investment across the tech ecosystem as a whole. Are we now in a situation in which a new risk-averse mood is driving investors towards relatively well-established bigger companies or is money flooding in across the whole sector?

Decacorn Dreams

There is – it has to be said – a lot of excitement about unicorns at the moment. Here in the U.K. – where I’m based –  local startup support agency, Tech Nation has been diligently highlighting the burgeoning numbers of billion-dollar businesses. The GP Bullhound report extends this narrative across Europe. Titled, Titans of Tech, the study notes that 52 companies have ascended to unicorn status over the past 12 months. Overall, the U.K. leads the way with Israel, Germany, and Sweden also performing well.   

“And we are moving beyond the unicorns,” says Madhvani. “We are now seeing more $10 billion companies – the decacorns.” These include the likes of digital bank Revolut, shopping app, Klarna and payments business, Checkout.com.   

But what lies behind the increased value of the sector as a whole? Madhvani cites a number of factors, not least increasing global appeal. “The best European companies were valued at lower multiples,” he says. “But what we’ve seen is U.S. funds becoming more comfortable with Europe. This has led to a huge rise in capital pushing up valuations.” 

In addition, he notes increased willingness of public equity funds to increase the supply of capital.  

Are All Boats Rising?

But what if you don’t enjoy the profile and trading record of a Revolut or Klarna. Is the incoming tide of investment helping all the boats in the harbor to rise? 

Madhvani says the ecosystem has changed. “A few years ago, there was a lot of funding at the small end but it was difficult to get scale-up capital until the metrics of the business were proven,”he says. 

That is changing. Success stories have sucked in capital at later stage funding rounds and Madvhani says this is also benefiting businesses further down the ladder. “There is a plentiful supply of capital and there is also a trickle-down effect,” he says. “Early-stage VCs have sold their shares and are now reinvesting.”  

There is also more knowledge in the system. The success stories of European tech have created a generation of managers and executives who know what it means to scale up and can pass their skills and expertise on.”  

Trends on the Market

The unicorn data to some extent points to the success stories of the tech boom – or at the very least to those segments where VCs are happy to invest large sums. Among Europe’s new $1 billion tech companies, GP Bullhound says 66 are in enterprise software, 31 in Fintech, 30 in marketplaces, and 15 in e-commerce.  

Looking to the future, Madhvani says GP Bullhound sees marketplaces and e-commerce continuing to be “super hot” but new trends are emerging, not least because of the pandemic.  

Blurred Lines

“There is a huge interest in healthcare and what we’re also seeing is a blurring of the line between health and education,” he says.  

Entertainment and gaming are also on the rise as is collaboration software. In one way and another, these are all sectors that have been given a boost by the stay-at-home, work-at-home world we currently live in. Will it last? Madhvani thinks so and is particularly bullish about collaboration software. 

Fintech remains something of a poster child for tech and Madhvani sees real opportunities for the market leaders, due to the data they process. “The winners in this sector can cross-sell health products, banking, insurance, and travel services,” he says.”They have so much data and we are moving into a period of instant decision making.”

Valuations don’t necessarily correlate exactly with the success of individual companies in the longer term, but higher valuations do mean that Europe’s tech companies are increasingly able to gain access to the funds they need. It’s not a uniform picture, though, Some businesses do struggle around Series A and B. and certain sectors attract more funding than others.