Invest Europe published its annual report on investment and fundraising for the European private equity and venture capital industry. The report covers activity on over 1,250 firms, directly verified by fund managers using the European Data Cooperative (EDC). The EDC holds data from over 3,000 European private equity firms on 8,000 funds, 64,000 portfolio companies and 250,000 transactions since 2007. The research is recognised by coverage in the Financial Times.

The investment market is booming

Findings in the report paint a delightful picture of the Investment development in Europe. Fundraising reached €91.9 billion, surpassing 2016 by 12% and the highest level since 2006. Pension funds provided 29% of all capital raised, followed by funds of funds (20%), family offices & private individuals (15%), sovereign wealth funds (9%) and insurance companies (8%).

Private equity hits ten-year high

Simultaneously Private equity investment in European companies hit a ten-year high at €71.7 billion, a 29% year-on-year increase. Almost 7,000 companies received investment, of which 87% were small and medium-sized enterprises (SMEs). Divestments (measured at cost) increased by 7% to €42.7 billion. This is the third highest level of the past decade, with around 3,800 European companies exited in 2017. Venture capital investment increased by 34% to a ten-year high of €6.4bn, surpassing 2008’s amount by 13%. Nearly 3,800 companies were venture-backed, an 8% increase.

PE investments by industry

Companies focused on consumer goods and services in Europe received 15% more private equity investment compared to last year, representing 24% of the total. Almost equalling this were business-to-business products and services, increasing by 51% to account also for 24% of the total. The technology sector (ICT) reached a ten-year investment high, with 17% of the total, a year-on-year increase of 6%.

Geographical Distribution of the Investments

France and Benelux-based companies received 27% of private equity investments in 2017. Close behind was the UK & Ireland with 26%, followed by DACH-based companies (20%), Southern Europe (13%), the Nordics (9%) and CEE (5%).

Note: You can read this article in German at DerBrutkasten.com.

For a long time, thinking about self-employment and entrepreneurship wasn’t a priority in Austria with high entry barriers (investments). Luckily, times have changed. Digitization has dramatically lowered these barriers. Today, anyone can come up with a good idea at the kitchen table and use it on their laptop, and soon after, business life begins. High investments in machinery and factories are no longer necessarily needed.

Beginning and end of the first VC funds

Only a few years ago, almost all initiatives within the Austrian startup ecosystem were run by the state. We experienced a market failure. The veterans of the venture capital scene Gert Reinhard Jonke (Venture Capital Funds), Michael Tojner (then venture investor behind BWIN), PONTIS Ventures and later Gamma Capital Partners had either already developed further, could no longer put together new funds, or have simply missed the advent of a new founder era. Startups in Austria were not completely at the beginning, but they needed new pioneers.

The beginning of the startup ecosystem 2.0

With Start Europe and later Pioneers Festival, the potential of the Austrian startup ecosystem and the need to catch up internationally became very clear. The most well-known early drivers of today’s startup ecosystem Speedinvest, i5Invest, Hansi Hansmann, Stefanie Pingitzer, Selma Prodanovic and our company (Venionaire was established in 2012) had initially a hard time to attract the attention from media, politics, and society. Even in 2015, it was too early to convince institutional investors on a larger scale, with many still licking their wounds from the dotcom bubble. Today, there are again efforts to address these investors, whether it will succeed to convince them this time is still uncertain.

Private initiatives are getting stronger

In addition, Austria hadn’t enough successful startup founders, who could support the ecosystem as mentors and investors after their exit. All of this has changed dramatically in recent years and the ecosystem has developed greatly – the number of investors has multiplied, established companies are regularly working actively with startups, and some government initiatives have done an excellent job creating a market that adapted the dynamics of the private sector. Above all, the commitment of institutional investors should be promoted so that Austria’s investment power will be further expanded. Especially in the field of high technology is still hidden potential that could be exploited through investments and technology transfer centers. The current strength of the scene can still be expanded!

In the next segment of this article, we present you an overview of the startup ecosystem in Austria from an investors perspective. This list was inspired by Bernhard Hauser’s blog and is build on his content. If an important player is missing, we are very happy if you shoot us a quick email.

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Business Angel Networks (private sector)

Mergers of Business Angels are not a new invention. They offer Angels several benefits, such as sharing experience, co-investing, or better dealflow. Networks, which (also) operate in Austria in alphabetical order:

• aaia
• eQventure Beteiligungsgesellschaft
• European Super Angels Club (ESAC)
• IECT – Hermann Hauser
• PRIME CROWD
• Startup300 (Linz)
• Tyrolian Business Angels (TBA)
  

Business Angel Network (public)

• i2 Business Angel Börse (AWS)

Venture Capital Fonds

• 3TS Capital Partners
• Allinvest
• Apex Ventures
• ARAX Capital Partners
• aws Gründerfonds (Staatliche Förderbank – AWS)
• B&C Innovation Investments
• Capital300
• CleverClover
• Dellbruck Ventures
• ecos private equity
• EXF Alpha (Venionaire Investment; European Super Angels Club)
• Fiedler Capital
• Kapa Ventures
• Michael Grabner Media
• OÖ Hightechfonds (LAND Oberösterreich)
• Pioneers Ventures
• PUSH Ventures
• red-stars.com
• Round2 Capital Partners
• Scheuch Family Foundation
• Speedinvest
• tecnet Equity (LAND Niederösterreich)

Corporate Venture Capital

• A1 – invests opportunistically (no own fund yet)
• UNIQA Ventures – invests opportunistically (no own fund yet)
• KELAG – invests opportunistically (no own fund yet)
• APA – invests opportunistically (no own fund yet)
• Kurier – invests opportunistically (no own fund yet)
• Seven Ventures – Media for Equity
• Constantia New Business
• Russmedia

Acceleratoren

• Agro Innovation Lab
• Factory1 (KAPSCH Trafficom)
• ElevatorLAB (Raiffeisen Bank International)
• GreenStart (Klima und Energiefonds)
• Match Maker Ventures
• WeXelerate

Company Builder / Incubator

• Accent
• Akostart (University / University of Applied Science OÖ)
• Blue Minds Factory
• Build!
• Cast
• CELIAN VENTURES
• INITS
• Institute of Science and Technology Austria — Cube
• Sciencepark Graz
• Speedstart Studio
• tech2be
• UT11 (Up To Eleven)
• Werkstätte Wattens
• Zentrum für angewandte Technologie

Startup Zentren bzw. Innovation-Hubs

• Lake Side Park (Klagenfurt)
• Factory300
• Talent Garden (Eröffnung 2018, geplant)
• WeXelerate (Grand Opening, Nov. 2017)

Training and Coaching for Investors / Startups

• Business Angel Institute

What is a startup? Esther Gons from the Dutch Startup Studio NEXT.Amsterdam wondered how easily Austrians use the term “startup” for every kind of new business. In this guest article, she explains how NEXT.amsterdam defines a startup and why it is important to use this term precisely.

Startups are everywhere, they are disrupting, new, fast and moving quickly. Rapid technological development and digitalisation have changed the world we operate in. ‘The global reset’ I often call it. Tech startups have seized the opportunity due to lower barriers to entry and started to look for ways to help people in this new world. Changing the business models of long existing companies along with it. Both corporates and investors have taken an interest in this development and are looking for ways to profit from it.

What is a Startup?

As a seasoned startup mentor and investor, who is also helping corporates with innovation within their company, I have seen all sides of the coin. With the sudden interest in startups and innovation, the core importance of why the term startup is there in the first place is often overlooked. When I ask people: “Do you know what a startup is?” – the answers vary from ‘a young business’, ‘a business under 5 years old’ to ‘a business that does tech’ or is ‘doing something new’. Now, when Steve Blank first wrote about startups he described it as follows:

A startup is a temporary organisation designed to search for a repeatable and scalable business model.

Although both repeatable and scalable are important elements of this definition, the most important part here is the word search.

Business Model

Startups are actively searching for a business model that works. Everything they do is focused on that specific goal. This precisely is why they are different from a starting business, even if that business includes software. A starting business, say a new hair salon, has a proven business model. This means that you have to invest in execution on that proven model in order to grow profits. In the lean startup methodology, there is a clear distinction between the search phase and the scale phase. Only when a startup has found a business model that it has proven to work, the startup is ready to scale. The uncertainty in the searching phase is also the reason why the lean startup methodology came into being in the first place.

The first step

While startups are searching, and starting businesses are getting ready to execute on scaling, corporates are very effectively executing on their core business. They have taken scaling and optimized on this. All of their core mechanics and processes are optimized on executing towards growth. So much so that it is not always obvious anymore. For such a company it is much harder to do innovation from within. What do you do with a new product that has been invented outside if all you have to judge is success by its ROI? How do you keep track of a new innovation if you ask them to predict the next 5 years in a business plan? A startup cannot come up with these predictions since it doesn’t really know yet. How to accommodate searching with all of the existing execute governance? The first step towards being able to innovate is to understand this difference between searching and executing. Because the biggest risk of failure for startups in a corporate environment is premature scaling.

Difference

As an investor or a corporate innovator investing in new projects, it is important to realize that this difference in mechanics will also need a different approach and a different process of reviewing progress. Understanding the difference between a startup and a starting business is an important one. It will help both the portfolio and the way you can add value to a startup. Searching requires a rhythm of creating, testing and learning. It needs to invest in proving their value to their customers. Before the startup has proven that it is ready to scale, there is no point in investing in marketing and sales or push for ROI. Investing in a startup before the scale phase needs a different approach and involves a much higher risk than investing when a startup has moved from the search to the scale phase and is thus ready to execute on growth.

Esther Gons is the co-author of the book The Corporate Startup; how established companies can build successful innovation ecosystems and founder of the startup studio NEXT.amsterdam. NEXT.Amsterdam invests in and supports startups by providing dedicated mentor teams and a structured framework in their search for a working business model. Additionally, she is an innovation strategist, visual changemaker, international speaker, and has 20 years of experience as an entrepreneur and helped over 100 startups so far.