Welcome to the latest edition of the Silverpeak B&C Rounds report – a review of Series B&C investment rounds into European technology companies. The dataset covers total capital invested, average deal sizes, frequent investors, investments by country, among other statistics. The aim of this report is to provide readers with a good understanding of the fundraising environment for technology companies in Europe.
Series B&C deal activity exhibited a substantial slowdown QoQ , with total deal value falling to 2.27bn, 66%, the same as Q3 2019 which was, however, a record at the time. Deal count reduced to 59, 41%.
In Q3 only one fund led 2 or more Series B or C rounds ECBF leading 2 Series B rounds. In Q1 and Q2 17 funds led 2 or more series B and 6 led 2 or more Series C.
Overall, median deal sizes are getting smaller. Series B and C experienced a QoQ decrease of 27% and 41%, respectively to €23m and €44m median value.
Silverpeak, the mid-market technology specialist that represents European growth businesses in M&A and financing transactions, has acted as the exclusive financial advisor to the shareholders on the sale of Avvio, including institutional investor Calculus Capital.
This move brings together two of the industry’s most dynamic, entrepreneurial companies and follows Serent Capital’s investment in SHR in 2020. Serent Capital sponsored the acquisition of Avvio through SHR to create a technology powerhouse for independent hotels and chains with unrivalled customer support across the world.
Headquartered in Limerick, Ireland, and founded in 2002 Avvio has been a pioneer in hotel technology for 20 years. In 2017 it launched the world’s first AI powered booking engine, allora.ai. Today allora.ai provides technology to over 500 hotels around the world and powers over £400m in transactions every year.
Silverpeak worked closely with management and shareholders on this transaction, leading a global twin-track private equity and strategic process accompanied by a full suite of vendor due diligence; reaching out to an international audience within a highly competitive process. Silverpeak supported management on the refinement of their business plan and operating model, shaped the equity story, negotiated key transaction terms and skilfully navigated the shareholders through an increasingly complex and evolving economic backdrop.
The eventual acquirer optimally allowed for an exit event as well as participation for management as part of a wider hotel technology group. Headquartered in Houston, Texas, SHR is a revenue generating platform that helps hotels to execute their best revenue generation strategies through its tightly integrated central reservation system (CRS), customer relationship management, and revenue management systems. It supports over 1,500 independent, group, casino and long-stay hotels, manages over 6 million reservations, sells 19 million room nights and drives £2 billion revenue per year through its Windsurfer CRS.
Frank Reeves, CEO & Co-Founder of Avvio Limited, said, “Silverpeak understood what we wanted and delivered a great buyer paying an attractive price. Throughout the process Silverpeak’s team were passionate about the Avvio business and sector whilst providing wise counsel, problem solving and strategic positioning. Our dedicated Silverpeak team were impressive from day-1 and quickly established a strong, collaborative relationship with us. I was impressed by their global reach to all the relevant strategic buyers and private equity bidders, and they designed a process that allowed me to continue as an investor in the business going forward“.
Sean Finnan, Chairman of Avvio Limited, said, “I found the Silverpeak team energetic on the details and thoughtful on the strategic approach which led to a very positive outcome for all concerned. Would definitely recommend them to anyone evaluating partners for a company sale”
Paddy MccGwire, Managing Partner at Silverpeak, said “Avvio is an exceptional hotel software business led by co-founder CEO Frank Reeves, with strong international growth. We ran a global twin-track PE and strategic sale process, selecting Texas headquartered SHR,, as they were not only a great strategic fit, but also provided an opportunity for the CEO, Frank, to roll some of his proceeds into the combined business”.
Paddy MccGwire, Silverpeak Managing Partner, spoke at the inaugural ScaleUp Conference this week.
The event provided technology entrepreneurs with insights into the current state of the growth funding landscape and the technology sector at large. with a panel of expert speakers from the Scaleup Group, Silverpeak and TechMarketView followed by entrepreneurs, from both private and public companies, sharing their scaleup journeys.
Paddy’s keynote provided an overview of the Series B&C growth funding market for European tech companies highlighting:
The funding environment in the two years to Q2 2022 has been an extraordinary trend aberration
Investment in Q3 2022 fell 65% from Q2, to the same as Q3 2019, which was a record level of investment
The UK had the biggest reduction in number of investments, but still leads Europe by number and value
Series C megadeals of €100m+ fell from 42% to 7% in Q3
If you would like to discuss this report please get in touch with Paddy MccGwire, firstname.lastname@example.org
Acquirers and investors have been circling Europe’s vibrant deeptech sector for several years now. Yet as the economic picture clouds, how is this affecting appetite for dealmaking in this area?
Software and SaaS deals may have dominated the headlines for a decade or so, but over the past three to four years, another corner of the technology space – deeptech – has been garnering increasing amounts of attention from strategic acquirers and financial investors. Silverpeak analysis shows, for example, that venture capital (VC) funds have raised an estimated €4bn of capital for investment in European deeptech since 2021.
Encompassing areas such as fundamental artificial intelligence, semiconductors, spacetech, medtech, IoT and additive manufacturing, deeptech aims to solve complex scientific and engineering problems. Companies in the sector benefit from defensible IP and their value creation potential for shareholders is significant, but their growth path and time to market is longer than for many other types of technology business, such as those in software or e-commerce. The complexity of the technologies and the problems they address naturally means that R&D time horizons are more extensive and incubation is more capital-intensive. These companies also therefore need investors and advisors with specialist knowledge.
For those with the expertise and patience required to exploit deeptech’s potential, companies in the sector offer attractive investment and acquisition opportunities. As a result, we continue to see strong European deeptech deal volumes, even as the economic outlook has become more challenging.
Our analysis shows that, while large deals are notably absent in 2022, European deeptech M&A activity in the sub-$1bn deal value range this year has remained largely consistent with historical levels. The third quarter saw deals in this bracket worth an aggregate $1.89bn, which suggests a run rate for H2 of $3.65bn. This is on a par with the value recorded in H2 2021 ($3.64bn), which was a time of exceptionally strong dealmaking in the technology sector more generally.
This demonstrates that there is clear appetite among strategic acquirers for European deeptech companies at the middle and lower end of the deal size spectrum. Buyers may consider these smaller deals as less risky, given the risk of recession. They may also see segments of the deeptech sector as an answer to some of the issues businesses face today – automation and robotics could relieve pressures stemming from labour shortages and rising wages, for example. Further, for US buyers in particular, European deeptech targets offer access to skilled workers that tend to have higher retention rates and lower average salaries than their peers in the US.
Enter the venture funds
However, VC investment is where we see the biggest shift in the deeptech deals market today. There is now a deep pool of investors targeting this space in Europe – our analysis shows that 236 investors participated in deeptech A, B and C rounds in the first nine months of 2022, with nine of these participating in at least three rounds in the sector.
Our data suggests that these investors have altered their investment approach against the backdrop of a challenging economic environment in many markets. In 2021 – a more bullish period than the one we are experiencing today – Series C rounds in European deeptech companies totalled $1.47bn, with a median deal size of $44m. However, for the first nine months of 2022, Series C activity slowed to just €369m, with median deal size falling to $20m.
VC investors are instead doubling down on earlier-stage opportunities. The year so far has been particularly strong for Series A rounds in European deeptech companies: at $795m, the first six months of 2022 saw the highest value – by some margin – of half-yearly Series A rounds to date, and H2 looks set to be equally robust, with $360m in Q3 alone. This compares with a full-year total of $538m in 2019 and $970m in 2021. Further, the median A-round deal size has risen substantially this year: in 2019 and 2020, this was $9m and in 2021, $11m; yet the median for the first nine months of 2022 stood at $14m.
So why are we seeing this pattern emerge among VC investments? One potential explanation is that larger companies are cutting costs at a time of more difficult economic conditions in a bid to preserve the capital they have raised to date. This will naturally reduce the size of the rounds they are looking to raise. At the same time, VCs are more cautious about investing large sums in more mature companies for the simple rationale that the path to exit may be more challenging in the near-term.
Yet on a more upbeat note, the other reason for more early-stage rounds is that VCs are playing a longer game: they are financing and supporting a bedrock of emerging deeptech companies that will continue to develop through a likely recession. Under this scenario, these businesses would reasonably be expected to start generating revenues as the economic cycle turns to a more positive outlook.
Deeptech innovations fostered today will bring about a new period of profound technological transformation in a variety of fields that could, among other things, accelerate medical breakthroughs, help stem climate change or solve supply chain problems in a de-globalising world. Our analysis demonstrates that there is a strong appetite among VC firms for investment in these early-stage opportunities today and that this will help to build the foundations for future transformation.
Silverpeak is a mid-market technology specialist representing European growth businesses in M&A and financing transactions. Our experience of working with European deeptech businesses includes investment rounds and acquisitions by leading international strategic buyers, institutional investors and VC firms. Our eight most recent deeptech deals had an aggregate enterprise value north of $700m and a cumulative transaction value of over $300m.
If you would like further information, please contact us: Pietro Strada, Managing Partner email@example.com
Silverpeak has advised the Vaarst management team on the extension of their Series B financing round, bringing the fundraising total to over $26m. The advanced capabilities of the company’s 3D SLAM computer vision and autonomous robotics technology that enable subsea ‘digital twin’ creation, plus the growth in the ‘blue-economy’ sector has attracted additional investors including the Strategic Development Fund and Future Planet Capital and has driven additional participation from existing investors.
Silverpeak, the mid-market technology specialist that represents European growth businesses in M&A and financing transactions, acted as the exclusive financial advisor to Vaarst and its sister company Rovco in extending the round from the initial $20m raised.
Vaarst is a leading provider of subsea 3D computer vision and SLAM technologies; supporting offshore wind, wave and tidal, scientific, and maritime security sectors. It also uses ground-breaking AI-based technology to revolutionise how energy companies manage subsea infrastructure and improve asset integrity.
Rovco delivers Vaarst technology into the energy transition space, mainly focused on its use for subsea surveys in the offshore wind sector where it is a market leader in the UK, and also in oil field decommissioning and subsea cable laying.
Vaarst and Rovco had already accelerated their global expansion plans following the first close of the Series B raise in March, entering the US market through the strategic appointment of Mitch Johnson, their new Americas Director. Its existing customers now include Iberdrola, SSE and Deepocean, and the company has recently signed a contract with Van Oord to perform subsea investigation works on Dutch offshore wind farm Hollandse Kust Noord.
Silverpeak was engaged due to its expertise in the deeptech and software sectors, as well as extensive knowledge of the international investor market. The company was positioned as an autonomous robotics leader in the global blue technology sector and attracted a range of international financial investors as well as strategic counterparties with a strong interest in renewable energy and ESG-focused investments.
David Ford, Partner at Silverpeak, leading the process said “We are delighted to be the ongoing /retained advisers to the Vaarst and Rovco teams as they accelerate their global growth plans. The additional investment announced here demonstrates Vaarst’s technology lead in the marine robotics marketplace, and also the ability of the Rovco team to execute complex offshore contracts effectively.”
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