CAN BE THE MOST ENTREPRENEURIAL

CONTINENT?

29 October 2020 1 Journey so far: Europe ditching its old image

2 Present: Entrepreneurship, jobs, skills,

3 Future: What’s needed most in the next five years

3 Journey so far: Ditching an old image Why do we need entrepreneurialism?

NASDAQ $10 trillion Personal The Mobile Cloud AI computing web computing computing Apple $2.1T Covid-19 $1.7T $1.7T $1.1T Dotcom $0.8T Crash Banking Alibaba $0.8T crisis $0.7T

K-shaped recovery

1970s 1980s 1990s 2000s 2010s 2020s

Page / 4 EuropeanStartups.co Source: Dealroom.co and Google Finance data as of October 14, 2020 A huge part of the US economy is now venture-backed.

$1.2 trillion VC invested since 1995

$10 trillion value of VC-backed companies

Almost 50% of R&D spending

>10% of jobs

Page / 5 EuropeanStartups.co - slide inspired by Klaus Hommels How does Europe compare?

$1.2 trillion $200 billion VC invested since 1995 6x less

$10 trillion $700 billion value of VC-backed companies 14x less

Almost 50% of R&D spending Not meaningful

>10% of jobs <1% of jobs

Page / 6 EuropeanStartups.co - slide inspired by Klaus Hommels Since 2005, European started to ramp up.

Salesforce ($160B) Netflix Tesla ($180B) ($160B) Facebook € 230B Amazon Google ($650B) ($1.2T) ($1.0T) European VC ramps up

»

» Asia 5% 16% 10% 15% 13% 12% 4% » Europe

2020E

Global venture capital invested

Page / 7 EuropeanStartups.co Source: Dealroom.co. Note: 2020 is annualized based on Jan - Oct. Europe has created 205 unicorns, mostly venture backed.

Cumulative number of European unicorns created by year $1 billion valuation was reached

20% VC backed 87% VC backed

€136M average funding (1) ~€355M average funding (1)

Page / 8 EuropeanStartups.co Source: Dealroom.co. 1. Mean funding when reaching unicorn status. Top 5 most valuable VC-backed companies since 2005.

2.5x $419B

$170B

Page / 9 EuropeanStartups.co Source: Dealroom.co and Google Finance data as of October 14, 2020 Remarkably, 38% of all global seed stage capital is raised by European startups.

% investment in 2019-2020 per round size and per region Row

Asia

North America

Europe

Page / 10 EuropeanStartups.co Source: Dealroom.co Note: the labels “Seed”, “Series A” are standardised labels per Dealroom.co method, not the reported labels as they are not consistently applied. Three generations of European startups

38% of all seed capital is invested in Europe

Adyen vs. Stripe vs. Netflix Just Eat Takeaway vs. Uber Eats

Amazon, Google, Facebook, Microsoft etc. Unchallenged in Europe

Up to 2005 2005-2015 Today

PagePage / 11 / 11 EuropeanStartups.co

Page / 11 Present: Entrepreneurship, jobs, skills, innovation Snowball effect in is in full force in Europe.

Criteo Alando Spotify LoveFilm Bibit

Zalando Daniel Ek Zoopla

Daphni Transferwise LocalGlobe Framer GoCardless Auto1

Atomico Seedcamp Cherry Nested Northvolt Ventures Passion Capital Cazoo Monzo

Starship Starling Technologies

Duffel

Page / 13 EuropeanStartups.co Source: Dealroom.co Does everyone now work at a startup? 10x 20M+ ~ 3.2M 10% annual growth

2M jobs Close to 10% of employment 1.5M jobs 2M jobs 1.4M jobs

2016 2020 2025 2016 2020 2025

Page / 14 EuropeanStartups.co Source: Dealroom.co Startups have become a significant … and are by far the fastest and contributor of new jobs …. most resilient growing job engine

Page / 15 EuropeanStartups.co Source: based on Dealroom.co analysis of data for Netherlands and . https://www.bain.com/insights/how-chinas-cloud-market-differs-from-others https://www.bain.com/insights/eight-great-trillion-dollar-growth-trends-to-2020/

Talking points USA spends more on IT More money going into tech

Spending on IT as % of GDP (2018) Whole environment into tech 4.0% 3.7% Faster adoption

2.2% 2.2% 2.1% Getting corporates to innovate more 1.1% 0.8% 0.7% Darpa

US UK Germany France Japan South Korea India

IT spending ($B) $830B $105B $89B $61B $104B $18B $22B $88B

GDP ($B) $20T $2.8T $4T $2.7T $5.0T 1,620 2,667 13,424

Page / 16 EuropeanStartups.co Source: Bain analysis of Gartner, IDC, Economist and other data. Corporate R&D spending is dominated by Big Tech.

$199B

Amazon Alphabet Intel Microsoft Apple Oracle Cisco IBM Qualcomm $98B Broadcom Western Digital Medtronic Abbott Laboratories Johnson & Johnson Micron Technology Merck NVIDIA Ford VMWare Pfizer $40B $40B Salesforce General Motors Volkswagen Siemens Snap Eli Lilly and Company Roche Nokia Bristol-Myers Squibb Novartis Ericsson General Electric Daimler SAP Sanofi Philips GSK HP BMW U.S. Tech U.S. Industrial European Industrial European Tech

Page / 17 EuropeanStartups.co Source: PwC, The 2018 Global Innovation 1000 study. Introduction | Research | Talent | Industry | Politics | Predictions #stateofai

Google, DeepMind, Amazon, Microsoft have hired 52 tenured and tenure-track professors from Brain drain: AI professors leaving universities for Big Tech. US Universities between 2004 and 2018. Carnegie Mellon, U. Washington and Berkeley have lost 38 professors + 85 during the same period. Note that no AI professor left in 2004, whereas 41 AI professors left in 2018 alone.

Google, DeepMind, Amazon, Microsoft, Uber, NVIDIA, Facebook, IBM, Apple, Intel, Netflix,

Carnegie Mellon, University of Figure note: Graphs include AI professors who Washington, Berkeley, completely left academia or reported a dual Georgia, Toronto, Stanford, industry and academic affiliation Michigan, Harvard, Purdue

- 97

Page / 18 EuropeanStartups.co Source: State of AI report.

Wikipedia stateof.ai 2020 Future: What’s needed most in the next five years Helping the current generation of startups.

Realised 80 unrealised exits unicorns 300 potential future unicorns 20-30% graduation 2,800 rate Series A+ startups

Shortage of European 50K Pre-seed & Seed startups

Page / 20 EuropeanStartups.co Source: Dealroom.co. European VCs have been raising record amounts of new funds.

Seed Series A+ Growth stage €12.7B €12.8B €12.1B

€190M $2B €463M Feb 2020 Apr 2020 Jun 2018

€9.4B

€8.2B $200M $820M $477M Sep 2019 Feb 2020 Mar 2019

€6.6B

€175M $735M $375M Jun 2019 Feb 2020 Mar 2018

$115M $500M €193M Jun 2019 Nov 2019 Nov 2019

€100M $400M Latitude: $180M 2015 2016 2017 2018 2019 2020 YTD Sep 2020 Nov 2019 Dec 2018

Page / 21 EuropeanStartups.co Source: Dealroom.co. But European startups need at least 3x more capital than that, already today. Additional investor groups

█ New European VC funds █ Capital raised by European startups

€38B USA & Asian VCs Growth &

€29B €28B €24B Sovereign Wealth Funds Corporates

€17B €16B €12B €13B €13B €9.4B €8.2B €6.6B Family Offices / Private Wealth

2015 2016 2017 2018 2019 2020 YTD

Page / 22 EuropeanStartups.co Note: New funds raised are invested over different years and also some capital raised by European VC is also invested abroad. We will see much bigger companies built in the next 20 years

Much bigger tech companies will be built in the coming years, needing more funding

$88,000 Social Impact & Value Creation (Annual $ per capita)

$36,000 Discretionary Non-Discretionary Internet Internet $6,00

0 $4,500 Higher $3,000 $36k

$2,200 Private FE $7k Assets Family $1,000 Rental $900 $8k 2ndary LG5

$300 $7k Primary

Early $3k Years

Entertainment Apparel Energy Food Transport Health Education Housing Finance

Page / 23 EuropeanStartups.co Source: LocalGlobe presentation. Europe already has institutions and programs to provide support.

UK France Germany Sweden Netherlands EU Israel USA

BPC/BBB Bpifrance KfW Capital Saminvest RVO (Seed Capital) EIF No No £2.5B €6.5B €0.5B $0.5B €0.3B €12B

BMWi Israel Innovation Small Business Bpifrance Vinnova Horizon Europe Innovate UK EXIST €78M (2019) No Authority (IIA) Administration $2.5B Grants €1.3B $0.3B (yearly) €100B ZIM €0.6B (2019) $0.5B (2019) (yearly)

Bpifrance HTGF €325M Almi InvestNL EIC Accelerator SBIC (part of SBA) No No Equity co-investing €1.6B Coparion €225M $0.2B €1.7B €3.0B $5.5B yearly

Bpifrance KfW Group Almi EIB SBA SBIC No No Debt co-investing €1.3B ERP Start-up Loans $0.3B €2.1B $0.7B $5.5B yearly

Yes CIR Yes WBSO Yes No Yes Yes R&D tax credits £4.5B (2018) €6.2B (2019) €0.2B (2018) €1.3B (2020) $9.7B (2018)

£2bn No No Yes No No No No Investor tax relief (EIS/SEIS 2019)

Page / 24 EuropeanStartups.co Note: preliminary Dealroom analysis. Yeah, Deep tech is cool. But you know what’s really cool?

European Deep Tech: $150B (1)

Page / 25 EuropeanStartups.co Source: Dealroom.co 1. Sum of the valuations of all startups in the ecosystem founded after 2000. Yeah, Deep tech is cool. But you know what’s really cool?

European Tiktok: $150B Deep Tech: $150B (1)

Page / 26 EuropeanStartups.co Source: Dealroom.co 1. Sum of the valuations of all startups in the ecosystem founded after 2000. What do companies that dominate their market have in common?

Search Google 90%

Social Facebook 70%

Online advertising Facebook + Google 70%

B2B eCommerce Alibaba Rakuten 80%

Video streaming Youtube + Netflix 80%

Mobile operating systems Android + iOS

Cloud hosting AWS + Google + Microsoft 60%

Online payments Paypal, Stripe 60%

Payment cards Visa, Mastercard Unionpay 80%

Market share in core domains

Page / 27 EuropeanStartups.co Inspired by Benedict Evans’ Jan 2020 presentation Standing on the Shoulders of Giants (data from companies and Zenith). Source for B2B: “In-depth: B2B e-Commerce 2019” by ecommercedb.com What should we really be building?

Things that Deep Tech people love to use

Page / 28 EuropeanStartups.co Supply first Demand first

What should we really be building?

Things that Deep Tech people love to use

Solving our biggest challenges

Page / 29 EuropeanStartups.co Yes No

Attract & incentivise talent Government picking winners

Late stage capital (fund-of-funds) Deep tech without commerce

Penalize exits or employee ownership

Page / 30 EuropeanStartups.co Appendix: additional data 2016 2017 2018 2019 2020E

Main drivers behind record VC investment European venture capital seems unfazed by the pandemic. A generation of experienced operators (founders, developers, executives) launching startups, with bigger ambitions than ever before. Venture capital fundraising in € billions

European venture capital investment €11.2B Record amount of venture capital raised by €10.2B European VC, as a result of better track record, and possibly supported by low interest rates. Also, more risk appetite, like in SIlicon Valley.

Government support, both on European and national level as tech hubs became political Rest of Europe priorities and a key pillar of urban strategies (EIF, BBB, Bpifrance, et cetera).

France €4.9B US and Asian investors becoming more active in Europe, after seeing big outcomes and relatively lower valuations. Corporate, Sovereign Wealth Germany Funds, Family Offices and other alternative investors started piling in as well.

United Kingdom The advent of mega-rounds, as a result of asset heavy models, and companies staying private longer to fund aggressive growth for longer. Q3 2016 Q3 2017 Q3 2018 Q3 2019 Q3 2020 All of the above also led to a war for talent, driving up wages, and a war for users, driving up advertising costs.

Page / 32 EuropeanStartups.co Source: Dealroom.co

$17B

$9B

$6B

In 2015, 11% of global venture capital was European venture capital is Share of global venture capital is invested into European startups. By 2019, this was up to 16%. getting to serious scale. stable at around 15%. In 2019, European startups raised €39 billion, compared with €116 billion in North America and €66 billion in Asia. In other words, North American VC investment is 3x €38B higher than in Europe, compared to 5x higher ~€35B in 2015. Meanwhile, comparing the valuations of the top-5 VC backed companies from the last decade, the difference is only €28B 2.2x (see page 9).

€24B The increase in Europe was partially the 88% 87% 84% 85% RoW 90% result of Chinese investment collapsing. The €17B collapse of investment in China provides a lesson to Europe: it takes time to build an €29B ecosystem and quick gains are also quickly YTD lost.

By number of venture capital rounds greater than €2 million(1), Europe has increased its 12% 13% 16% 15% Europe 10% share as well. In 2019, 26% of those rounds were raised by European startups, up from 2016 2017 2018 2019 2020E 2016 2017 2018 2019 2020E 18% in 2015.

Page / 33 EuropeanStartups.co Source: Dealroom.co https://docs.google.com/spreadsheets/d/1L1HBz4sb6i51MpMHNwPJTX6g17qYJq4fLFNg2gOHlEA/edit#gid=926655354

European tech ecosystem has ballooned to €618 billion in combined value.

Combined value(1) of the ecosystem €618 billion █ Rest of ecosystem █ 10 Most valuable tech companies Top 10 companies: €215 billion

€422 billion

€123 billion

Rest of Unicorns: €222 billion

€155 billion

€30 billion Future Unicorns (2) : €103 billion

Rest of ecosystem

Source: Dealroom.co 2015 Jan 2020 Oct 2020 1. Sum of the valuations of all startups in the ecosystem founded after 2000. Using estimated valuations based on most recent VC rounds, public markets and publicly disclosed valuations as of October 22, 2020. 2. A future unicorn is defined as tech driven company valued over $200 million but less than $1 billion, excluding acquired and/or public companies.

Page / 34 EuropeanStartups.co Rounds larger than €50M

Foreign investors are still key to European startups. % of total VC investment into Europe from outside Europe, total VC % of total VC investment into Europe, for rounds % of total VC investment into Europe, total VC larger than €100M

28% 35% 35% 36% 40% 38% RoW 47% 55% 61% 62% 60% RoW

72% 65% 64% 60% 62% Europe 53% 45% Europe 39% 38% 40%

2016 2017 2018 2019 2020E 2016 2017 2018 2019 2020E

Page / 35 EuropeanStartups.co Source: Dealroom.co estimates.

% of total VC investment into Europe % of total VC investment into Europe from outside from outside Europe, total VC Europe, for rounds larger than €100M

45% 39% 38% 39% 65% 64% 60% 61% 53% 62%

40% 39% 61% 62% 35% 36% 55% 61% 28% 47%

2016 2017 2018 2019 2020E 2016 2017 2018 2019 2020E European venture capital investors are less involved in larger rounds.

% of European investment in 2019-2020 by source and size

USA and Canada

Asia

Rest of World

Cross-border

Domestic

Source: Dealroom.co estimates. Page / 36 EuropeanStartups.co Note: the labels “Seed”, “Series A” are standardised labels per Dealroom.co method, not the reported labels as they are not consistently applied.

Venture capital investment activity: 2020 vs. 2019

Monthly venture capital investment amount - cumulative Monthly number of venture capital rounds above €2M - cumulative European startups raised €15.8B in H1 2020, down 21% on the same period in 2019.

Surprisingly however, the number of rounds is almost the same as last year. Only rounds above €2 million are measured here because they’re less affected by reporting lag.

Mega+ rounds (€100M+) were down in H1 2020, but mid-range (€4-40M) rounds are still growing.

While overall investment in Europe was down year on year, Germany, the UK and France showed the most resilience, down 20%, 10% and 5% respectively, compared to -37% for the rest of Europe.

Despite an historic crisis and uncertainty, venture capital appetite in Europe remains strong.

Page / 37 Source: Dealroom.co. VC investment in Europe per country.

Cumulative venture capital investment amount from January to October

2019 2020 Jan-Oct Jan-Oct % change Estonia €0.1B €0.2B 109% Ireland €0.5B €0.6B 36% Belgium €0.6B €0.8B 25% Austria €0.2B €0.2B 13% Finland €0.8B €0.9B 11% Norway €0.3B €0.3B 7% Netherlands €1.2B €1.3B 6% United States €98.1B €100.6B 3% France €4.3B €4.4B 2% Japan €1.1B €1.1B -3% Sweden €2.6B €2.5B -3% Israel €3.7B €3.5B -6% China €29.7B €27.5B -7% India €9.4B €8.5B -10% United Kingdom €11.4B €10.1B -11% Germany €5.9B €4.3B -27% Switzerland €1.8B €1.3B -27% Denmark €0.5B €0.3B -34% Spain €1.1B €0.5B -51% Romania €0.7B €0.2B -69%

Page / 38 Source: Dealroom.co VC investment in Europe per country (excl. mega-rounds).

Cumulative venture capital investment amount from January to October, rounds below €100M

2019 2020 Jan-Oct Jan-Oct % change Finland €0.3B €0.7B 131% Switzerland €1.0B €1.3B 37% Netherlands €0.9B €1.0B 17% Ireland €0.5B €0.5B 15% Austria €0.2B €0.2B 13% Germany €2.9B €3.1B 5% United States €52.2B €51.1B -2% Israel €3.1B €3.0B -3% United Kingdom €7.2B €6.6B -9% Belgium €0.6B €0.5B -11% Japan €1.1B €0.9B -14% France €3.5B €3.0B -15% India €5.2B €4.3B -16% Estonia €0.1B €0.1B -18% China €11.3B €8.3B -27% Italy €0.5B €0.3B -31% Sweden €1.1B €0.7B -33% Denmark €0.5B €0.3B -34% Spain €0.8B €0.5B -36% Norway €0.3B €0.1B -59%

Page / 39 Source: Dealroom.co France has responded most decisively.

Country Covid-19 response Amount per startup with >€1M funding

France €5.2B €3.0M per Bpifrance Guarantees, accelerated tax credits, direct loans 1,700+ startups

Germany €2B €2.0M per BMWi / KfW / regional banks Fund-of-funds, direct loans 1,000+ startups

UK £1.25B €0.5M per BBB, Innovate UK, EIS Co-investing and direct loans 2,700+ startups

Sweden SEK3B €0.5M per Saminvest, Almo, Vinnova Direct investing, guarantees, tax credits 600+ startups

Netherlands €100M €0.2M per RVO, BOM, InvestNL Direct loans 450+ startups

EU €300M €40K per EIF, EIB, EIC, Horizon Europe Fund-of-funds triggering investments of up to €1.2B 8,000+ startups

Israel $180M €0.2M per Israel Innovation Authority Direct loans 900+ startups

USA -- -- Small Business Admin

Page / 40 EuropeanStartups.co Note: preliminary Dealroom analysis. 2019 average EU per capita funding still lags the US and Israel. But individual countries like the UK, Sweden and Finland have closed in significantly.

Venture capital funding per capita in 2019

Venture capital funding per capita in 2014-2019

Page / 41 EuropeanStartups.co Source: Dealroom.co. World Bank for population. https://docs.google.com/spreadsheets/d/1mwcCFlYzDKlfTuXtMtpFeadHWOoL4FRmaYS-ruiplFk/edit#gid=0

Valuation Employment Employment % EURB Valuation % Top 10% 567,820 44.9% 761.6 77.8% Rest 698,364 55.2% 226.5 23.1% The top 10% companies represent 78% of value but only 45% of jobs. The other 55% of the 200K jobs are generated by a long-tail of 12K+ VC backed startups. total 1,266,184 988.1

Older grownups contribute most of the jobs. But younger startups contribute by far most of the The top 10% companies represent 80% of value but less than 50% of jobs. incremental jobs.

Power Laws mean that the top-10 Contribution by decile employers represent 77% of value. ▉ Company valuation ▉ Jobs But 73% of jobs are generated by a long-tail of 4,900+ startups and scaleups. 80% 80% The top 5% companies represent 78% of value Nearly all value is concentrated here Accelerating: but only 45% of jobs. The other 55% of the eCommerce, Healthtech, Fintech, Food 200K jobs are generated by a long-tail of 60% 60% 12K+ VC backed startups.

Slowing down, but still hiring: Software, Mobility, Hosting, Gaming 40% 40%

Most jobs are here Downsizing Travel, Jobs, Event tech 20% 20% 200K Net jobs added per year

0% 0%

0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% 90-100%

Decile

Page / 42 EuropeanStartups.co Source: Dealroom.co. It’s not just about spending money online. The digital consumer is managing work, banking and (re)schooling also online.

$17 trillion $17 trillion income expenses & savings (work and other)

Net savings Income from assets Lending/Investing European households €35tn in assets €7tn debt (77% mortgages) Income from assets Communication Fashion Recreation Travel Reschooling Services Social benefits Remote working Education

Mobility Gig & passion Freelance work $12 trillion Health economy expenses

Food Wages Jobs marketplaces ◀ Banking & financing ▶ Housing

Page / 43 EuropeanStartups.co Source: Dealroom analysis of Eurostat (EU28) data. https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm

PWC R&D TOP 1000 2018

Corporate R&D spending is dominated by Big Tech.

Amazon $23 billion Alphabet $16 billion Volkswagen Samsung $15 billion Intel Corporation $13 billion Microsoft $12 billion Apple Roche $11 billion Johnson & Johnson Merck & Co Toyota $10 billion Novartis $9 billion Ford $8 billion Facebook █ Europe (incl. UK) █ Non-Europe Pfizer General Motors Daimler $7 billion Honda Sanofi Siemens $6 billion Oracle Cisco GSK Celgene BMW Nokia Exor IBM QUALCOMM $5 billion AstraZeneca

R&D spend 2018

Page / 44 EuropeanStartups.co Source: PwC, The 2018 Global Innovation 1000 study.