A new promising year has just started, and it is now a great moment to look back at the past 12 months to remind and analyse the key facts, in venture capital, that marked 2019 and that will shape the one just started.
Joining the prestigious club. 124 companies joined
the unicorn status, hence reaching a valuation of 1B$ or higher. This number
levels the one of 2018 when 126 companies joined this exclusive club. American startups
claim here the most prominent role with over majority of the new entries being
US based. Europe has also its fair share with 20 new unicorns coming from the
old continent. Amongst these the fintech scale up N26 (DE), Rapyd (GB) and Numbrs
Farewell. Startups stories are about success, growth,
innovation but they are also about failure. In 2019, 553 startups, with total
funding of $1.9B,
failed. The most notable one is Anki, Inc. For the robotics and AI startups,
the 182 M$ raised and the over 1.5 Million robot units sold, were not enough to
overcome the challenge of running out of cash. Bankrupt was declared in April 2019
and its assets were acquired by Digital Dream Labs in December.
Diversity & inclusion. This remains a problem in
the startup scene. While we don’t believe that it an industry specific issue,
but rather the mirroring of a society problem, it is relevant to note that
women founders and startup executives remains a minority. Beyond sex disbalance,
discrimination relates to other factors with “nearly a quarter of people in the
ecosystem say they’ve experienced discrimination on factors from ethnicity to
Acknowledging a problem is the first step to work out a solution and we believe
that the new year will bring an improvement (and we hope a material one!).
WeWork IPO did not workas planned. What was expected
as the most promising IPO of 2019 turned out to be one of the largest disasters
in the startup scene, when he jaw-dropping 1.9 B$ losses the company wrote down
in the 2018 financial books, became public. The story is known with the
stepping down of Adam Neumann, the postponing of the IPO at a much lower valuation
than the original plan. The consequences of this case are expected to spread
over to other companies and to be fully seen in 2020. The fail of this IPO is indeed
not only the failure of WeWork and its management, it’s a warning sign for the
whole VC industry and the approach of valuing top line growth above all. We are
expecting now a higher focus on gross margin rather than on scale.
The reality of the stock market. Uber, Lyft and
Peloton went, in 2019, from being a privately owned unicorn to a listed company
in the stock market. And their entering into the temple of public companies was
a stumble. For the three companies, the stock price quickly dropped from the IPO
value, showing how financial market investors are after different KPIs than VC funds.
While the product, the consumer appeal and ability to scale were without doubt
a winning catachrestic for the 3, profitability remained an open question mark
and one of these not liked by the market. These cases could represent the tipping
point of exponential valuation based on top line growth. 2020 will tell us.
Look East. Look India. In the last year we saw an
astonishing growth of Chinese startups, investors and the overall ecosystem.
The Sino scene is still the strongest startups reality in Asia but 2019 has also
shown an incredible raise of the Indian scene, with tech startups in the
country totalling a record-breaking funding of $14.5 billion (+37% vs. PY). These
numbers are a consequence of both the strengthening of the local VC system as
well as the increase of foreign investors tapping into Indian deals.
We expect for 2020 a continuation of this growing trend as India, with its highly
technically skilled working force – and in most of cases English mother tongue –
could be on the verge of AI revolution.
Fintech and AI lead the charge. Looking at startup
fundings (both in # of deals and money raised) we see how the majority of
investors are betting that these are the sectors with the highest chances to
produce the next Facebook, Apple or Amazon. While Fintech has the ambitious aim
of democratizing the access to capital and breaking the monopoly of the
financial intermediaries, Artificial Intelligence brings to the market new technical
solutions to solve complex problems across several disciplines. The year just
started will see a continuation of this trend and furthermore we expect to see,
in the coming months, a clearer definition of the sectors which will be impacted