European early-stage funding has increased dramatically over the course of the past years. Atomico and Dealroom gave a very interesting perspective on the drivers of this growth in their report: “The Journey to Series A in Europe. Fundraising benchmarks for founders of early-stage companies”. They conclude that today we have about 4 times the seed investment we had in 2012 and also the number of active investors has been massively grown. In 2017 there were 4.7 times more unique investors with >4 investments per year than in 2012.
Not all Seed Capital is Created Equal
However, not all seed capital is created equal. The report shows companies raising seed rounds from certain top investors are significantly more likely to raise also a Series A, and do so faster. The median time from reported Seed to Series A is 18 months. The median for Europe’s 36 months conversion rate is 19%. The best investors have a 40% conversion rate to Series A.
We at the Startup Heatmap Europe asked ourselves, where the top investors are active and whether startups from all over Europe have access to their experience? In fact, we observe closely the development of investments around Europe and see also peripheral markets catch up in numbers of funds raised. However, often the composition of these funds, sometimes made up of government and corporate funds, raises the questions if it is smart money or if smart money remains concentrated in typical locations.
Atomico and Dealroom in their report identified the following top seed investors: Point Nine, Local Globe, Kima Ventures, Seedcamp, Passion Capital, Initial Capital, Connect Ventures, Isai and 500 startups. Their European investments have a staggering 40% conversion rate to Series A on average.
Looking at their HQ locations, we see that 5 are based in the UK, 2 in France and each 1 in Germany and the US.
 Point Nine Capital | Berlin, Germany | http://www.pointninecap.com/ |
 Local Globe | London, UK | http://www.localglobe.vc |
 Kima Ventures | Paris, France | http://www.kimaventures.com/ |
 Seedcamp | London, UK | http://www.seedcamp.com/ |
 Passion Capital | London, UK | http://www.passioncapital.com/ |
 Initial Capital | London, UK | http://www.initialcapital.com/ |
 Connect Ventures | London, UK | http://www.connectventures.co.uk/ |
 Isai | Paris, France | http://www.isai.fr/ |
 500startups | Mountain View, US | http://500.co/ |
When looking at the portfolio of the top investors, the first observation is, that their investments are largely located outside Europe. Mostly they invested in the United States (1,143 Seed investments since 2012). However, these are mainly kima ventures of French business angel Xavier Niel and US-based 500 startups. If we deduct these, the other top investors have about 11% of their portfolio in the US.
UK has the most seed investments in Europe
Looking only at investments in Europe, the UK captures 40% of these and is the leading destination of our top seed investors. It is almost on par with the whole of Western Europe with Germany, Austria, Switzerland and France, who have 418 portfolio companies (48%). Almost 80% of these are in France and Germany on the second place has only 18,6%.
The other western countries had just a few seed investments by the top investors: Switzerland had 4 and Austria 3. Looking at the distribution of the seed investments by investor and country, the significant concentration becomes clear:
Every year each of the top seed investors made an investment in UK and the US. In UK LocalGlobal had 87 investment (almost 61% of the total investments), Kima venture 47 (7%), Seedcamp 119 (59%), Passion capital 38 (65,5%), 500 startups had 40 investments (3,8%). In US LocalGlobe had 22% of all Investments and 500 startup had 79% of all seed.
There are also some countries where only one of the top seed investors made an investment: Poland (4 times by Point Nine Capital), Lithuania (2 times by Kima ventures), Luxemburg (one time by Kima ventures), Macedonia (one time by Seedcamp), Ukraine (one time by 500 startups), Serbia (one time by 500 startups).
There are also some countries in Europe which didn’t get any attention by the top seed investors, for example:
- Greece
- Slovakia
- Hungary
- Island
- Romania
- Albania
- Belarus
It is clear from this analysis that top seed investors are very much concentrated in a few markets and startups outside these locations have a lower chance to benefit from their experience. Since access to “smart capital” is a key aspect to scaling up a company, it is important for the European ecosystem to bridge the gap between investor locations and hotspots of entrepreneurial talent. At this point, we do see that the burden is still very much on the entrepreneur who is required to move where the capital is, while even the most successful seed stage investors, tend to stay close to their home.