The startups in EUROPE Startup scaleup IPO 4
- Slides: 12
« The start-ups in EUROPE » Start-up, scale-up & IPO 4 challenges, 4 answers Prof. Rudy Aernoudt Senior economist European commission raernoudt@gmail. com
Double-hit scenario: v becomes w 2020: - 11, 1% 2021: + 7, 5% 2020: - 14, 4 % 2021: + 5 % raernoudt@gmail. com
Corona-impact Stage Pre-Seed & Seed Series A Series B+ Later Last fin Averag round e Empl. (m€) 20 70 160 600 1 -4 4 -15 Potential outcome 3 rd and 4 th Quartile performers Can manage cash-burn Can raise from investors if needed Accept smaller round & valuation Sufficient seed capital available Even in a normal circumstances, 70 -80% of seed stage start-ups do not make it to series A Can manage cash-burn Many will reduce team by 25 Can raise from investors if needed 50% Accept smaller round & valuation For some, crisis will be fatal Plenty of series A capital available 15 -100 Cash-burn harder to manage Shortage of European mid-stage capital already pre crisis, now worse Many will reduce team by 2550% Focus on profitability Crisis will be fatal for many, including some that otherwise would make it 100+ Sufficient growth equity available but terms have changed dramatically (e. g. Airbnb) A few high-profile failures in bottom quartile (e. g. We. Work)
EU recovery = 2, 4 trillion € = 12 % of EU-GDP 1074
The 4 challenges Capital Needs IPO High Risk Low Risk Business Angels Friends, Family & Founders 1 EXIT First Equity Gap Scale. Formal up gap Venture Who fill the ‘Equity Gaps’? Capital 1. BA syndication 2. ESCALAR 3. IPO Fund Time 0 Seed Start-up Early Growth raernoudt@gmail. com Scale-up
# Challenge 4: Entrepreneurship: no guts, no glory Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage Niccolo Machiavelli (1469 - 1527) raernoudt@gmail. com
Facts & figures: stage of investment In Bi-euro US EU Comments (2019 – NVCA & Invest-europe) Seed stage 7, 5 0, 7 10 x Early stage 32 4, 9 7 x Later stage 90 2, 6 34 x Total annual VCinvestments 130 8, 2 15 x raernoudt@gmail. com
The scale-up gap: Unicorns leaves Europe raernoudt@gmail. com
ESCALAR Balance sheet Venture capital fund Assets 1. INVESTEES (scale-up companies) Liabilities FUNDING MECHANISM 2. EQUITY Including Public money 3. Quasi-equity ESCALAR (leverage on return) raernoudt@gmail. com (e. g. pension funds with EU guarantee)
Blending of financial instruments • 1 st step: • Private equity or BA: 30 M€ • 2 nd step: • Fof - EIF: 10 M€ - NPB: 10 M€ - 3 rd step - ESCALAR - Raising 50 M € from capital market trhough EFSI guarantee ESCALAR FUND Private equity 30% 50% 10% NPB (eg Kf. W) EIF Patient guaranteed investors rudy. aernoudt@ec. europa. eu 10
Why wasn’t ESCALAR done before?
