Venture Capital/Analysis/

US investment into Europe’s startups hits an all time high

Which US VCs are pouring the most money into Europe’s startups?

By Freya Pratty

Member

Interest from US VCs in European tech companies has accelerated over the past two years, reaching an all time high last month. 

Less than halfway through the year, American investors have already put 10.1bn into Europe’s startups in 2021, according to Dealroom; easily surpassing the 9.3bn invested in all of 2020.

The increasing quality of European startups and founders, as well as attractive valuations compared to the US has lured an increasing number of American investors in the past two years. 

Limited Partners also see money to be made — European VC now outperforms European listed equities, private equity and US VC across a one, three, five and 10-year horizon, according to Cambridge Associates.

In 2020, Silicon Valley VC Sequoia opened its first European office in London, and US investors have been key in supplying capital for Europe’s burgeoning growth-stage ecosystem. 

Over the last ten years, the share of US investment has equated to roughly 50% of the funds put into Europe’s startups. Funding overall has grown significantly, but the US has continued to match the increases seen in domestic and European funding. 

In 2010, US investment accounted for 65% of the funding and, in 2021, that figure stands at 55%.

Who is investing the most?

Out of all the American VC firms putting funds into Europe, Accel has participated in the most rounds in the past 12 months. They’ve invested in 32 rounds and have backed 31 unicorns, including Deliveroo, UiPath, Monzo, Hopin, Doctolib and sennder. 

The firm is based in California, but it opened its European fund in 2001 and now has an office in London.

Last summer, Accel launched a new programme for scouts in Europe, giving them $200k each to invest in any startup of their choosing. 

The next most active is Insight Partners, based in New York, which has participated in 30 rounds in Europe in the past 12 months. The company has backed 22 unicorns, including Checkout.com, Pipedrive and German fintech N26.

Coming in third is 500 Startups, an early stage and seed fund run out of California, which has participated in 28 rounds. They’re followed by Bessemer Venture Partners, who’ve put money into 21 rounds, backing unicorns like Mambu and Pipedrive.

 

So which companies are US investors backing?

The top ten rounds that have included participation from US investors so far this year span a variety of industries.

Saying that, US investors seem to be particularly active in fintech.

  • Want to know who the 12 most active US fintech investors were in 2020? Click here!

Klarna’s $1bn round in March this year was the biggest round to include American investment, with Silver Lake Partners, Technology Crossover Ventures, Sequoia, BlackRock, Dragoneer Investment and HMI Capital all backing the fintech. 

It’s also notable as European tech is starting to see interest from not just VCs, but PE giants such as Silver Lake. 

The top five biggest rounds with US investment also includes telecoms software company MessageBird, Romanian robotic automation company UiPath, food delivery firm Wolt and AI drug discovery company Exscientia. 

European payments startup SaltPay’s $478m round in April this year is notable because it’s the biggest round for a European company with lead US investors. 

A focus on the UK

So far in 2021, companies from a diverse range of countries have raised the biggest rounds with US participation: Wolt in Finland, UiPath in Romania, Klarna and Epidemic Sound in Sweden, Glovo in Spain and MessageBird in Holland.

Nonetheless, of the 460 rounds which included US participation, over a quarter (168) of them were British companies. 

The two top rounds in the UK were courtesy of SaltPay and Exscientia. This exemplifies the broader strong focus of US investors on the UK, natural given that the UK is still Europe’s most mature tech ecosystem.

Specifically, investors are still overwhelmingly focused on the capital, with 65% of companies receiving US money based in London. The rest is focused on big university cities: Oxford, Cambridge and Edinburgh. 

German companies have secured 60 rounds with US participation, and France 51. The next highest is Spain with 24, followed by Switzerland and the Netherlands, both with 19.

There’s some evidence of US investors looking beyond capitals, funding companies in Oulu, a small city in northern Finland for example, or Chareroi in Belgium, Bilbao in Spain and Ede — a small city in the Netherlands.

What next?

Overall, the trend of increasing US investment into Europe looks set to continue, with 2021 already dwarfing 2020 investment levels. 

There are those, however, who worry that a strong US investor presence, especially in later stage rounds, means that the profits from European tech exits and successes disproportionately benefit American investors.

Freya Pratty is Sifted’s news reporter. She tweets from @FPratty

Join the conversation

avatar
  Subscribe  
Notify of