Yes, it’s that time of the year again, when every Tom, Dick and Harry dusts off their crystal ball and does their best Mystic Meg impression.
And I’m afraid I’m one of them, as I couldn’t help but share the four things I believe the European tech market will see happen in 2016.
True to form, I’ve used data to back up the majority of my predictions, so they are not completely pie in the sky, however, they are certainly not cop-outs either.
1) There will be more EUnicorns (European unicorns) at this point next year than there are today
To me, this seemed like a complete no brainer and in all honesty, I assumed that everybody felt the same. However, CB Insights ran a Twitter poll asking this question last week and of the 186 who answered, 52% believed we will see less than the 145 (global) unicorns at the end of 2016 than we see today.
We’ve also seen reports break over the last couple of days that Swedish unicorn-in-waiting Truecaller has let as much as 20-25% of its staff go due to financial reasons, potentially putting their seemingly imminent unicorn status on hold. BUT, (and that is a big BUT) Europe has an exceptional pipeline of companies close to a billion dollar valuation in the wings, and in our article with London-based venture capital firm Atomico earlier this year, their Head of Research Tom Wehmeier demonstrated that 97% of Europe’s billion-dollar companies were founded in 2011 or earlier.
Taking an average of six years to achieve a billion-dollar valuation, Europe has a whole host of companies about to pass this milestone in the next couple of years. So, barring a spectacular market crash, I would bet my house on there being more European unicorns at the end of 2016 than we see today. According to WSJ’s Billion Dollar Club, that number is currently 13.
2) Investment from the United States in European tech startups will continue to increase
American investment in Europe in 2015 has increased dramatically, and I believe this will pick up even more pace in 2016. 2015 has seen Sequoia invest in a Swedish seed round, Andreesen Horowitz leading Transferwise’s $58 million Series C, 500 Startups setting up all over Europe and Union Square Ventures European funding rounds accounting for 25% of their total investments.
As these renowned U.S funds continue to look to Europe, other American investors will follow their lead and join the party in 2016.
Especially as Europe benefits from a more attractive entry pricing with the median pre-valuation by round considerably lower than the US. And, the US actually ‘only’ creates three times more ‘unicorns’ than Europe does – but they raise five times more capital in total. And as Tom Weihemer pointed out to me, this means ‘Europe is an underserved market with enormous potential’, and the US are waking up to this. Further evidence: Sequoia and Goldman Sachs both narrowly missed out on being classed as part of Europe’s 25 most active investors in H1 2015.
3) 2016 will see a record year for European tech IPOs
As 2015 saw Deezer and HelloFresh put their IPOs on ice, this prediction is a little bolder than my previous two, however I believe 2016 will see more IPO’s than this year and last, and despite the current market uncertainties, will ultimately be a record year for European IPO’s.
I fully expect HelloFresh to go public next year (and possibly even Deezer still), and in addition, Delivery Hero, Global Fashion Group, WestWing and Home24 are all strong IPO possibilities in the first half of 2016, meaning we could see a large group of big European tech companies (including several unicorns) all go public in a short space of time.
This will put momentum and belief back into the market, and subsequently lead to even more in the second half of the year.
4) Bigger unicorns will start buying smaller unicorns
This is a trend that I expect to happen globally, but one that could have a sizeable knock-on for the European scene.
Big American companies are well attuned to shopping European, with Facebook, Yahoo, Microsoft and Snapchat all buying European companies in Q3 2015 alone, and I believe this trend may well pass down to the American unicorns that are still privately held.
Despite my prediction above, there may well still be concerns about public markets next year and with Facebook, Google and Yahoo etc. all slowing down their acqui-hire strategies, being bought by a bigger unicorn may well become a viable exit option for the smaller ones. And as European unicorns are at the lower end of the valuation scale than American ones, it’s likely that it will be Europe’s billion dollar companies that are the ones getting picked up.
And as someone who doesn’t like to sit on the fence, I’ll end my predictions with a very specific one. With Uber moving more and more into the food delivery space, 2016 could see them acquiring Delivery Hero, as the billion-dollar companies who operate in similar verticals start to consolidate.
What do you think 2016 will bring for the European tech scene? Let us know in the comments.
Featured image credit: Shutterstock/Shutter_M