October 2013 - Go4Venture

24 Pages·2013·0.99 MB·English

by  Alasdair Gill

October 2013

Technology / Media / Telecoms / Internet / Healthcare / Cleantech / Materials
Go4Venture Advisers’ European
Venture & Growth Equity Market
Monthly Bulletin
October 2013

Published by Go4Venture Advisers Research, the Equity Research unit of
Go4Venture Advisers LLP.

About Go4Venture Advisers

Providing innovative, fast-growing companies and
their investors with independent corporate finance advice

to help them evaluate, develop and execute growth strategies

Equity Capital Markets (ECM)
 Equity private placements

 Growth equity financings and secondaries
 Pre-IPO advisory

Mergers & Acquisitions (M&A)

 Sellside
 Buyside / Buy and build
 Valuation services

Go4Venture Advisers LLP is authorised and regulated by the
Financial Conduct Authority (FCA).

© Go4Venture Advisers 2013
October 2013
Contents

This Month in Brief 2

Investments
1.1 - Headline Transactions Index (HTI) 5
1.2 - Large Transactions Summary 6
1.3 - Large Transactions Profiles 7

M&A Transactions
2.1 - M&A Activity Index 13
2.2 - Top 5 Global TMT M&A Transactions Summary 14
Headline European VC & PE-Backed M&A Transactions:
2.3 - Summary 17
2.4 - Profiles 18

List of Acronyms 21

About this Bulletin

The Go4Venture Advisers’ European Venture & Growth Equity Market Monthly Bulletin
provides a summary of corporate finance activity among emerging European TMT
companies:
 Investments, i.e. Venture Capital (VC) and Private Equity (PE) financings,
including growth equity, financing rounds with single secondaries components
(recapitalisations); and
 M&A Transactions where the sellers are VC and PE-backed European companies,
including all majority transactions with no new investment going into the business
(e.g. acquisitions, Management Buyouts (MBOs) and other buyouts).
Investment activity is measured using Go4Venture’s European Tech Headline
Transactions Index (HTI), which is based on the number and value of transactions reported
in professional publications.
M&A activity is measured using data from a combination of external sources, primarily
Capital IQ, with complementary reporting from 451 Group and VentureSource.
Europe is defined as Western, Central and Eastern Europe, excluding Israel.
For more details, please refer to the Methodology Note available on our website.
Please note that no part of the Bulletin can be reproduced unless content is duly attributed to
Go4Venture and the details of republishing are notified to [email protected].

© Go4Venture Advisers 2013 Page 1
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October 2013
This Month in Brief

Dear Clients and Friends,

Welcome to the latest edition of Go4Venture Advisers’ European Venture & Growth Equity Market Monthly
Bulletin, featuring our proprietary Headline Transaction Index (HTI) of investment activity, as well as a
summary of VC & PE-backed TMT M&A exits of $50mn or more.
European Market: Growth Now Slowing Down
Something unusual happened in the Headline Transactions Index (HTI) in October: we had for the first
time in the past 5 years a sharp slowdown in year-on-year investment growth from one month to the
next. Not only was the overall amount down vs. September but we also had far fewer Large HTI
Transactions to write up, partly because a higher than normal number of deals were just below our threshold
of £5mn / €7.5mn / $10mn. On the exit front, October was also extremely uneventful, were it not for
the Supercell transaction valuing the company at $3bn (€2.2bn).
Investment
Looking at the upcoming figures for November (dominated by the $250mn (€183mn) raised by Spotify –
more on that in our next issue), October looks like something of an anomaly but draws attention to two
interesting trends:
 The rate of growth in the European Growth Equity and VC market has been now slowing
down for the past three months. Just like we noted an acceleration of the market from summer
2012 on, we now see a deceleration since summer 2013. In a way, we see this as an encouraging
sign of overall discipline in a market, which we have felt was frothy for the past year; and
 The market is increasingly dominated by a handful of very large transactions, making the HTI
more susceptible to month-on-month swings. What we call “Landmark Transactions” (> €20mn)
now represent close to 50% of the overall investment amount captured in the HTI (so probably
something like 40% of the total market).
The continuing healthy state of the market is confirmed by a record 8 new funds of all kinds announcing
first closings, including:
 Early-Stage Funds – Examples include Project A (Germany) adding €30mn from Axel Springer to the
€50mn already received from Otto Group. And Episode 1, a new UK-based Enterprise Capital Fund
(with 2/3 public matching money) from a group of high-profile British entrepreneurs;
 Mainstream VC Funds – For instance Idinvest Digital Fund II (France), which closed with €30mn on
its way to €100mn (in part brought by Lagardère Group);
 Later-Stage Funds – Such as SAP Ventures II with €425mn from one limited partner, SAP, focusing
on software technologies worldwide. Or Oakley Capital (UK), with a €195mn first close from its
publicly-listed feeder fund and a target of €500mn. And Vinci Capital – Renaissance Technologies 4
(Switzerland), which had a first closing at €50mn (with a target of €80mn) for investment in Swiss
SMEs; and

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October 2013

 Thematic Funds – London-based Environmental Technology Fund (ETF) announced the first closing
of its second cleantech fund at €70mn. Ambienta (Italy) also raised its second fund, with a first
closing at c.€150mn, to invest in cleantech assets in Italy, Germany and the UK.
In terms of Large HTI deals, the 6 highlighted in this issue represent quite a balanced spread, from a
country, sector and stage standpoint. It is worth pointing out that 3 of the 6 are Landmark Transactions (a
higher proportion than usual), with Skyscanner as a tremendous flagbearer for the new face of
European venture. Here is a great example of what can be done in Europe extremely capital efficiently (the
previous round was only £2.5mn (€3.5mn)), even in a global space hotly contested by US suppliers, with the
ultimate reward: a marquee investor such as Sequoia Capital joining in.
For those who closely watch European growth equity and venture financing, we know that Europe has quite
a few gems in the making which will transform the European venture landscape.
The challenge is of course to build the next generation, as well as finding new ways to identify and grow
these seeds to their full potential. One such initiative with which we are associated is the Investor Showcase
we are arranging with professional tradeshow organiser ISE in February 2014.

Meet 20 World-Class Companies Active in Smart Buildings, Connected Homes, Digital

Signage and Professional Electronics

On Monday February 3, 2014 in Amsterdam, Go4Venture Advisers will partner with ISE to showcase 20
of the world’s most exciting companies in the space of professional electronic systems. The
companies will be primarily selected from the attendees of Integrated Systems Europe 2014, the world’s

largest electronics tradeshow reserved for professionals: 900 exhibitors, over 45,000 attendees.

Companies wishing to apply to present, as well as financial and strategic investors and other

participants, can register at www.ise.go4venture.com.

Exits
As has now been a common theme in our recent issues, the tech M&A exit front has been flat for the whole
year. October was as dull as any other month except for the Supercell big bang: SoftBank taking 51%
of Supercell, the Finnish gaming wunderkind. This transaction is remarkable in more ways than one, in that it
is:
 An outstanding VC exit valuing the company at €2.2bn – this is one of the biggest ever European
VC exits after Skype’s exit to Microsoft and Yandex’s IPO;
 A company generating truly extraordinary financial performance: nearly twice as much
revenues in Q1 2013 as in the whole of 2012, with an insane EBIT margin of 60% – all driven by two
games;
 A rare case of a European VC exit making it to the Top 5 Global TMT M&A Transactions league
table; and
 The only example of a buyer, SoftBank, making it to the Top 5 Global TMT Transactions twice
in one month. This is a reflection of the incredible drive of its founder and CEO, Masayoshi Son,
who recently announced that SoftBank aims to become the world’s largest company as measured by
EBIT, sales or market capitalisation.

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October 2013

The only other October European VC / Growth Equity exit paled in comparison: ISIS Private Equity sold
online holiday retailer On the Beach to Inflexion Partners for €86mn. On one hand, very mundane: it could be
seen as yet another lower mid-market private equity player selling to another – how unexciting for tech
people. On the other hand, this is exactly what the tech VC world needs to get better at doing:
 Creating more sizeable companies with more predictable outcomes more regularly; and
 In order to have the time to build substantial companies, being prepared to offer liquidity
opportunities to earlier shareholders. Of course this is easier to engineer in the stable cash flow
world of late-stage companies, where buyers and sellers can agree on a “reasonable” price. Venture
valuations are much less stable but they are also moving much faster, allowing new investors to take
higher risks on both new and secondary money as a price to pay to get into attractive
transactions. We see, for example, VCs buying out earlier business angels (if only to reduce the
number of shareholders around the table). It is only a matter of time before this happens more
regularly between VCs, say a larger fund buying out a small regional player, or a later-stage fund
creating liquidity for an early-stage VC.
The blurring border between late-stage VCs and lower mid-market PE funds is bringing a new DNA to the
world of European venture – let’s take advantage of it.
Enjoy the reading. Please direct any questions or comments to [email protected]. If you do not
wish to receive future HTI updates from us, please send an email with the title "unsubscribe" to
[email protected].
The Go4Venture Advisers Team
For more details about the Headline Transactions Index (HTI), please visit our website.

© Go4Venture Advisers 2013 Page 4
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October 2013

1.1 - Headline Transactions Index (HTI)

Go4Venture HTI Index by Deal Value
800
2010 2011
)n 700
m 2012 2013
€
( h 600
tn
o
M
re 500
p
s
n 400
o
itc
a
s 300
n
a
r
T
fo 200
e
u
laV 100
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Go4Venture Advisers Analysis; HTI Database

Go4Venture HTI Index by Cumulative Deal Value
3,500
2010 2011
)n 3,000
m
(€ 2012 2013
s
no 2,500
itc
a
s
na 2,000
r
T
fo
e 1,500
u
la
V
e
v 1,000
ita
lu
m
u 500
C
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Go4Venture Advisers Analysis; HTI Database

October 2012 2013 Year-to-Date 2012 2013
Large Transactions # 12 6 Large Transactions # 97 109
€mn 298.6 158.1 €mn 1,919.9 2,472.4
Other Transactions # 36 17 Other Transactions # 267 293
€mn 83.7 54.0 €mn 712.9 786.6
All Headline Transactions # 48 23 All Headline Transactions # 364 402
€mn 382.4 212.1 €mn 2,632.7 3,259.0
Of Which: Of Which:
Landmark Transactions # 5 3 Landmark Transactions # 31 30
€mn 211.5 124.0 €mn 1,140.0 1,567.3
Definitions
Large Transactions: > £5mn / €7.5mn / $10mn
Other Transactions: < £5mn / €7.5mn / $10mn
Landmark Transactions: subset of Large Transactions > €20mn / £13mn / $27mn

© Go4Venture Advisers 2013 Page 5
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October 2013
1.2 - Large Transactions Summary

(>£5mn / €7.5mn / $10mn)
# Company Sector Round €mn Description Investors
1 Skyscanner (UK) Internet B 59.2e Operator of a search Sequoia Capital.
www.skyscanner.net Services engine for flights with
growing activities in hotel
bookings and car rentals.
2 Intelligent Energy (UK) Cleantech Late 37.1 Developer of proton Undisclosed Investors.
www.intelligent-energy.com Stage exchange membrane fuel
cells.
3 Funding Circle (UK) Internet C 27.4 Lending platform that Accel Partners, Index
www.fundingcircle.com Services allows individuals and Ventures, Ribbit Capital,
institutions to loan money Union Square Ventures.
to small businesses.
4 SkySQL (Finland) Software B 14.8 Provider of an open California Technology
www.skysql.com source database and Ventures, Finnish Industry
associated services. Investment, Intel Capital,
Open Ocean Capital, Spintop
Ventures.
5 Exclusive Networks IT Services Late 12.0 Value-added distributor Edmond de Rothschild
(France) & Stage* specialising in B2B Investment Partners, Omnes
www.exclusive- Distribution supply of security, Capital, SOCADIF.
networks.com storage and networking
solutions.
6 Logentries (Ireland) Software A 7.3 Cloud-based service Floodgate, Frontline
www.logentries.com provider for collecting and Ventures, Polaris Partners,
analysing RRE Ventures.
machine-generated log
data.

Source: Go4Venture Advisers HTI Database
Key
Bold indicates lead investor(s)
* Internal round
e: Estimated

© Go4Venture Advisers 2013 Page 6
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October 2013
# Company Sector Round €mn Description Investors
1 Skyscanner (UK) Internet B 59.2e Operator of a search engine for flights Sequoia Capital.
www.skyscanner.net Services with growing activities in hotel bookings
and car rentals.
e: Estimated

Skyscanner (UK), operator of a search engine for flights with growing activities in hotel
bookings and car rentals, raised an estimated €59mn in a Series B round from new investor
Sequoia Capital. This follows the $5.1mn (€3.5mn) Series A round led by Scottish Equity
Partners (SEP) in November 2007. The size of this round was estimated assuming that Sequoia took a 10%
stake in Skyscanner which, based on the company’s $800mn (€590mn) post-money valuation, translates to
$80mn (€59.2mn). This is in line with the announcement that this was “one of Sequoia’s largest investments
ever” and would represent c.11% of the firm’s 2012 vintage $700mn (€514mn) Capital Growth Fund.
On the surface, an investment and valuation of this magnitude are surprising, given the size of the
company’s previous round. However, Skyscanner has since grown dramatically – between 2008 and 2012
total revenue increased from £2.1mn (€2.7mn) to £33.5mn (€40.9mn), a CAGR of 100%. Over the same
period the company has gone from a small EBIT loss to a £11mn (€13.4mn) profit. The investment also
comes on the back of a year which saw Skyscanner’s greatest percentage year-on-year increase in both
revenue and EBIT, its acquisition of Barcelona-based internet hotel search company Fogg and the opening
of a maiden North American office in Miami. The size of the investment can be further explained through the
confidence of Sequoia’s Chairman (and soon to be Skyscanner board member) Sir Michael Moritz.
According to Sir Michael, Skyscanner is "one of the most attractive tech companies in Europe" in a market
that “over the next decade will expand enormously, accelerated by a proliferation of mobile devices.” Sir
Michael’s presence on Skyscanner’s board is a significant vote of confidence: the Welsh ex-journalist is
remarkably influential for a Brit in America, having held board positions in Google, Kayak and LinkedIn
before stepping up as Chairman of Sequoia.
Skyscanner’s main competitors in the travel search market are Google, which acquired flight-pricing software
company ITA Software (ITA) for $700mn (€571mn) in 2010, and Kayak, acquired last year by online travel
reservation engine Priceline for €1.4bn. In terms of financials Skyscanner is relatively small, reaching a fifth
and a third of Kayak’s 2012 revenue and EBIT, respectively. However, one key advantage Skyscanner has
performance-wise is that it checks for fares on a comprehensive list of budget airlines as well as full-service
carriers, unlike ITA and Kayak which focus mainly on the latter.
This investment will support Skyscanner’s stated expansion strategy of continued growth in North America
(Kayak’s and Google’s territory) and a doubling in workforce (to 500) over the next year.
This deal continues a trend in the online travel sector including Gimv’s and Iris Capital’s €15mn investment in
the French online travel agent Planetveo in June and Phenomen Ventures’ $9mn (€7mn) investment in
Russian flight booking site OneTwoTrip. Acquisitions include Expedia’s December 2012 acquisition of 62%
of Trivago for €479mn and the aforementioned November 2012 acquisition of Kayak by Priceline for €1.4bn.
Sequoia Capital (€170mn (2012); AUM €2.3bn) last featured in our May issue as a seller in Yahoo’s €800mn
acquisition of Tumblr. Founded in 1972, Sequoia is one of the oldest and most successful venture capital
firms, having backed companies such as Apple, Electronic Arts, Google, PayPal and Yahoo. Notably,
Sequoia is a previous investor of Kayak and the online travel agencies Decolar and Via.
Despite this the size and valuation of this round, SEP remains Skyscanner’s largest shareholder, following its
£2.5mn (€3mn) investment in 2007.

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October 2013
# Company Sector Round €mn Description Investors
2 Intelligent Energy (UK) Cleantech Late 37.1 Developer of proton Undisclosed
www.intelligent-energy.com Stage exchange membrane fuel Investors.
cells.

Intelligent Energy (UK), a developer of Proton Exchange Membrane (PEM) fuel cells,
raised £31.5mn (€37.1mn) in a Late Stage round led by undisclosed investors. The
money will be used to finance the launch of new divisions and expand its Research &
Development (R&D) capabilities.
Founded in 2001, Intelligent Energy (IE), voted as a technology pioneer at the World Economic Forum in
2006, develops zero emission hydrogen fuel cells based on a proprietary version of PEM technology used to
create clean energy for portable electronic devices, small-scale power production (near point of use) and
vehicles. Its technology, which boasts higher power density and lower cost of fabrication among its
advantages over other fuel cell systems, is protected by a portfolio of some 550 patents covering 50 different
inventions. With more than 300 staff, the company reached revenues of c.£40mn (€50mn) in calendar 2012.
The company clearly described its expansion plans in its 2012 Annual Report, as well as the funding
requirements for their realisation. Following this round, IE is now in the position to proceed with its plans to
launch its consumer electronics and stationary power divisions (the latter initially in India), expand its R&D
activities (including the development of remote asset monitoring capabilities) and further develop its
management risk control systems.
Since its joint venture with Suzuki Motor Corporation – formed in 2012 to develop air-cooled fuel cell systems
– IE has signed partnerships with a number of well-known companies, including telecoms services providers
Cable & Wireless Communications (UK) and Etisalat Nigeria. It is also in advanced negotiations with
prospective clients in India, in particular Indian Oil, India’s largest oil and gas corporation by revenues, and
Microqual, an Indian telecoms infrastructure equipment manufacturer.
According to MarketsandMarkets, the fuel cell technology market is expected to grow from c.$630mn
(€460mn) in 2013 to c.$2.5bn (€1.8bn) by 2018, at a 32% CAGR; underpinning this are a number of relevant
investments and acquisitions over the past years. The European Union, along with the european private
sector, has agreed to invest €1.4bn through to 2020 in research and innovation partnerships for fuel cell and
hydrogen technology. Globally, corporates including GM, Pansonic, Samsung, Siemens, Toshiba and Toyota
have all invested in leading fuel cell technologies such as PEM, molten carbonate and solid oxide. Financial
investors have also been quite active in this sector, most notably with Goldman Sachs, KPCB, Mobius
Ventures and NEA investing c.$1bn (€733mn) over the last decade in solid oxide fuel cell provider Bloom
Energy, which is expected to reach profitability shortly.
Since its launch, IE has raised a total of €132mn over eight rounds. We covered its previous €26.4mn Late
Stage round in our March 2012 Bulletin, as well as its second largest round, a $30mn (€21mn) Series D led
by Yukos Capital and undisclosed investors, in our July 2009 Bulletin. This €37.1mn Late Stage round
remains its largest ever fund-raise. Excluding Yukos Capital (an affiliate of now-defunct Yukos Oil), which
first funded the company along with undisclosed investors, IE’s other known investors including Altima
Partners, F&C Investments, Scottish Enterprise and SSE Venture Capital, all established institutional
investors, have each never participated in more than one round, according to Venture Source.

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October 2013
# Company Sector Round €mn Description Investors
3 Funding Circle (UK) Internet C 27.4 Lending platform that allows Accel Partners, Index
www.fundingcircle.com Services individuals and institutions to loan Ventures, Ribbit Capital,
money to small businesses. Union Square Ventures.

Funding Circle (UK), a lending platform that allows individuals and institutions to
loan money to small businesses, raised $37mn (€27.4mn) in a Series C round
led by Accel Partners with support from fellow new investor Ribbit Capital and participation of existing
investors Index Ventures and Union Square Ventures. The money will be used to expand UK operations
and launch in the US, its second market.
We last saw Funding Circle (founded 2010) in April 2012 when it raised €12.2mn in a Series B round from
Index Ventures and Union Square Ventures to further develop its services, marketing and recruitment.
With over 100 staff the company now plans to expand its operations in the UK to include lending services
specifically for asset finance and real estate financing. In March this year, the company received £20mn
(€23.2mn) from the UK government to invest in SMEs. Funding Circle’s UK lending activity is expected to
increase even further following Vince Cable (UK business secretary) ordering £55m (€65mn) of government
money to be lent to SMEs through it and other lending platforms. The company is also planning to expand
its activity in the US market by merging with San Francisco-based Endurance Lending Network, an online
lender for small and medium businesses, which will rebranded as Funding Circle USA.
The competition in this market has significantly intensified since the mid-2000s, when the first lending
platforms appeared. In the UK there are now more than 10 known platforms including Zopa, the oldest and
largest loans platform (founded in 2005), having issued loans worth a combined c.£400mn (€472mn),
followed by Funding Circle which has lent a total of c.£180mn (€212mn), impressive considering its three-
year history. Others include Ratesetter and recently launched Assetz Capital. In comparison, the US market
is estimated to be much larger, with the two leading players, namely the Lending Club and Prosper, having
issued loans worth c.$1.5bn (€1.1bn) and c.$430mn (€320mn), respectively.
Readers should be familiar with lead investor Accel Partners (€356mn (2013); AUM €5bn), whose current
investment priorities are infrastructure, internet and consumer services, mobile and cloud services / SaaS.
We saw Accel last month investing €13.5mn in a Series B round in Calastone, a UK-based provider of
independent transaction services for the fund management industry. The firm also appeared this month in
our Bulletin as a seller of mobile game developer Supercell to SoftBank for €1.1bn (details in the next
section).
Fellow new investor Ribbit Capital (€73mn (2013)) is a US-based venture capital firm typically investing in
financial services. It last featured in our October 2012 issue when it invested €19.8mn in a Late Stage round
in UK-based Borro, a provider of online pawnbroking services.
Well-known investor Index Ventures (€350mn (2012); AUM €2bn), who also was a seller in SoftBank’s
acquisition of Supercell, featured last month in our Bulletin for a €13.1mn Series B round in SwiftKey, an
alternative keyboard app for Android. It also appeared in our March Bulletin when investing €9.3mn in a
Series B round in German online peer-to-peer lending platform Auxmoney, the same month as it backed
British peer-to-peer foreign currency transfer service TransferWise in a €4.6mn Series A round. Funding
Circle is at least its third 2013 investment in the financial services sector. In keeping with its preference for
consumer internet plays, Union Square Ventures’ (AUM €347mn) investments in this space include
Auxmoney (March) and Lending Club in 2011.

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