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The past year has been a prolific one for the European venture ecosystem, with a record $23 billion invested and $107 billion in exits for European VC-backed companies. This latter figure highlights a rather surmountable gap when compared to the U.S., which saw $136 billion in exits.
There are reasons to be optimistic, although not due to lack of challenges. Concern has emerged regarding the impact of technology on society. More specifically, it is difficult to ignore the discrepancy between the speed of technological innovation and the much slower rate of societal change to complement it (i.e. job automation). Investors are asked to be more discerning and companies are warned about corrections in the market. “This will be the year fat companies become fit companies. The world has been awash with easy money that has led to loose behaviors. The trend will be good stewards who can execute coming to the fore.” explains Alex Dunsdon, Partner at SAATCHiNVEST.
Still, there is growing confidence in the maturing European ecosystem, a belief that company building will benefit from unprecedented levels of speed and efficiency, a feel of new frontiers as innovation spans across industries and hubs, and a hope for increased diversity and inclusion.
With 2018 being a strong foundation to build on, I asked a selection of European VCs about the areas of innovation they look forward to following most in 2019. Their answers reflect wider conversations I’ve been having recently and recognize the impact of deep tech on a range of sectors, from healthcare and life sciences to enterprise and logistics.
No industry left behind
Fred Destin, Founder, Stride VC
“I’m excited to see venture expand its horizons into every segment of every industry – from farming to food production to genomics – and not just digital. The incumbents still don’t seem to be reacting so, as a secular trend, I see venture-backed companies playing an important role in more and more segments of the traditional economy.
As we build on top of a strong substrate of machine learning and analytics, we can build our companies faster and more efficiently, and deliver products with more impact.
I think London and the UK startup ecosystem will sail through Brexit and I’m convinced that the maturing European ecosystem will continue to generate consistently strong venture opportunities.
Innovation thriving at the intersection of disciplines
Irina Elena Haivas, Principal, Atomico
“ I believe 2019 will be a year of progress for deep tech companies, innovating at the cross intersection of disciplines. I am particularly excited by the intersection of Tech (hardware and computation), Data and Biology, which I believe create a new generation of venture opportunities while addressing some of the large challenges of the 21st century, like sustainability or health.
I think we will continue to see interesting opportunities in models that use deep tech tools such as AI or computer vision as enablers to existing solutions, in particular, enterprise SaaS, or in transitioning successful models from the more tech-savvy industries into the more traditional, tech-naive industries like healthcare or manufacturing.
I am also excited by the next chapter in wellcare, one that puts consumers at the center and integrates the various aspects of wellbeing – mental, physical, social, intellectual, financial.”
Paradigm shifts ahead
Jonathan Hay, Partner, Delin Ventures
“The process of getting things onto silicon is going to be transformed by companies like SiFive and our portfolio company Agile Analog.
In life sciences, I am interested in a change in paradigm in protein science. Fluidic Analytics in Cambridge offers probably the best technology in the world for studying how these proteins actually behave. I also think new computational tools will emerge that might make interesting platforms for drug discovery in this area.
Quantum computing is moving faster than expected. There are a whole series of breakthroughs taking place that might allow a scalable quantum computer with quantum circuits to be created in the next few years. Now is a good time to be understanding these technologies and trying to identify the ones that will be core as this technology takes off.
Something I am now more sure about is blockchain and IoT. Serious robust enterprise-ready infrastructure is finally being built and I expect some of this will go live in 2019. Applications will then be built on top of this infrastructure that will transform supply chains.”
Sensors, smart devices and even smarter algorithms
Vica Manos, Director, Anthemis Group
“For me, it’s (still) all about data, specifically in health insurance, life insurance and healthcare. We are at a point where data science and AI allow us to objectively quantify what was once subjective and unquantifiable. We can’t improve what we can’t accurately measure, so this is game-changing. I’m most excited to follow solutions which leverage this to detect hard-to-diagnose or time-critical conditions earlier and with increased accuracy, from neurodegenerative disease and mental conditions to hypertension and sepsis.
Combining sensors, smart devices and even smarter algorithms, we are able to track known biomarkers in the contour of everyday life. We can capture new insights from our vital signs, speech or even habits to augment the diagnosis and management of these conditions. When we augment diagnosis to the point of prognosis, we enable prevention. This is transformative in patient care, as well as underwriting and risk management.”
Robotics and software automation
Julien-David Nitlech, Partner, Iris Capital
“Robotics offers a huge field for transformation in industries, work and production. A good example is our investment in Exotec Solutions. There is a similar trend in Software Automation. UIPath or our investment in Braincube are good examples.
Also, I believe that stress on public financing will force healthcare to accelerate the way it embraces software and AI in helping managing public health concerns (i.e. general practitioners, disease anticipation and treatment).”
Rising expectations
Nicholas Stocks, Partner, White Star Capital
“The trend I’m most excited by for 2019 is consumerization of enterprise, particularly around B2B marketplaces. Businesses are no longer satisfied with poor user experience having become accustomed to their experience as consumers individually, plus they represent a significantly higher spend than consumers and with more recurrence. This extends from travel to food to packaging and more.”
Consolidated trends
Gilad Engel, Partner, Target Global
“We think that the trends we saw beginning to evolve in 2018 will be even more relevant in 2019, in particular: cross-sector ideas with real business parameters behind them such as ParkJockey or klarx (mobility, shared economy and property tech); SaaS solutions to SMB with clear, quick revenue-producing growth models, such as TravelPerk and Shedul; new solutions in Fintech such as Rapyd, plus continued growth in Insurance-tech solutions such as Wefox.
Finally, on the deep tech side, after a prolonged incubation period on the one hand and a premature buzz on the other, a few HW technologies are reaching maturity, including microLED (modifying the display offering on automotive, AR, outdoor displays etc.)”