From Start-up to Scale-up: Financing Growth Firms in Europe

Transcription

1 1 From Start-up to Scale-up: Financing Growth Firms in Europe KAREN E. WILSON SENIOR FELLOW, BRUEGEL AFFILIATE FELLOW, SAID BUSINESS SCHOOL, OXFORD UNIVERSITY EBAN Annual Conference Porto, Portugal 26 May 2016

2 Selected policy-oriented research 2 on entrepreneurial finance Global angel investment research OECD book Financing High Growth Firms: The Role of Angel Investors, Wilson, 2011 HBS/NBER/Bruegel report: The Globalization of Angel Investments: Evidence Across Countries, Lerner, Schoar, Sokolinski, and Wilson, 2015 European seed and early stage financing policies OECD Policy paper Policies for Seed and Early Stage Finance, Wilson and Silva, 2013 OECD Policy paper Policy Lessons from Financing Young Innovative Firms, Wilson, 2015 Scale up financing research Barclays report Scaling U.K.: Growing businesses, growing our economy, Cambridge and Oxford Universities, 2016 Duruflé, Hellman, Wilson report From Start-up to Scale-up: Examining Public Policies for the Financing of High-Growth Ventures, Forthcoming 2016

3 Central research questions in 3 forthcoming report What are the underlying challenges for financing scale-up? What is the role of public policy in addressing those challenges?

4 Methodology 4 Grounded in research and data Date sources include Beauhurst, Crunchbase, Preqin, Thomson One, a.o. Informed by current practice Discussions with industry leaders and policy makers Annual Oxford Entrepreneurship Policy Roundtables (launched in 2015 by Duruflé Hellman, Wilson) 2015: Scale-up Financing 2016: Equity Crowdfunding

5 An Analogy - A Car Journey Start-up is a car at the starting line Its destination is a place called Success Exact location unknown! To drive the car needs 5 Technology Management Finance

6 Along the journey the car encounters 6 Market conditions Traffic rules

7 Roundabouts! 7

8 The Crossroad for Scale-Ups 8 Stay private Go public Get acquired Start-up

9 Scale-up from a funding 9 perspective Founding Seed A-round B-round C-round Scale-up funding Start-up funding

10 Requirements for Scale-Up investors Financial muscle ( deep pockets ) Expertise ( smart money ) Networks ( connected money ) Long horizons ( patient money )

11 Venture capital investments as % of GDP (2014) Later stage venture United States Canada United Kingdom EUX Data Source: OECD (2015) % of Total VC Early stage Later stage US 33% 67% Canada 56% 44% UK 48% 52% EU (excl. UK) 57% 43% 11

12 Average amount invested ( m) THE SCALE-UP FINANCING GAP: EU VS US Early stage deals Later stage deals Number of deals (GDP adjusted) *Adjusted using 2014 GDP Sources: BVCA (2015); NVCA (2015); EVCA (2015); PEREP_Analytics (2015) 12

13 % of Foreign Investors Invested Amount Foreign vs EU Investors The role of EU vs. non-eu investors in EU companies Foreign vs Domestic Investment in EU Deals by Funding Round 45% 40% 35% 30% 25% 20% 15% 10% 05% 00% Seed A B C D E Funding Round % Foreign Investors Capital Invested Foreign vs EU Investor Date Source: Preqin, Data for the period

14 Investors fund companies for more rounds in US than EU 57% 42% 31% 33% EU US 25% 12% 1 ROUND 2 ROUNDS 3 ROUNDS OR MORE Data source: Preqin,

15 Avg. Fund Size $mn. Funds that invest in multiple rounds are larger (especially in the US) Sizes of Funds Investing in Multiple Rounds of Same Deal ROUND 2 ROUNDS 3 ROUNDS >3 ROUNDS EU (Incl. UK) US Data source: Preqin,

16 Median Fund Size ($mn.) US funds grow larger over time I II III IV V VI Data source: Preqin EU (Incl. UK) US 16

17 EU Venture Capital Exits Number of Exits EVCA (EU data) IPOs Trade sales Sale to PE/Financial Institution Total # Exits Total # Investments Data Source: EVCA, data retrieved 29/01/

18 Ratio (in %) IPOs: low % of exits 18 IPO Ratio of EVCA and NVCA reported Exits Year US EU Data source: EVCA, NVCA,

19 The Crossroad for Scale-Ups 19 Stay private Go public Get acquired Stay private Go public Get acquired Stay private Go public Get acquired Start-up

20 Global Distribution of Unicorns Asia 20% Australia 1% Canada 1% United States 61% Europe 11% India 4% Isreal 1% South America 1% Asia Australia Canada Europe India Isreal South America United States Source: Crunch Base, end of 2015

21 Alternative financing options 21 Equity Angel investors, crowdfunding (both typically early stage) Venture capital, hedge funds, private equity fund, cross-over funds, etc Debt Stock markets Acquisitions Bank Loans Asset-based lending Venture debt

22 Action items 22 We identify five areas of action 1. Large funds 2. Venture debt 3. Stock markets 4. Private liquidity 5. Investor capabilities For each area we develop concrete recommendations

23 Coming soon.. 23 From Start-up to Scale-up: Examining Public Policies for the Financing of High-Growth Ventures GILLES DURUFLÉ (QCC/PUBLIC POLICY FORUM) THOMAS HELLMANN (UNIVERSITY OF OXFORD) KAREN WILSON (BRUEGEL AND OXFORD)