Speedinvest: 84% of investors consider Europe’s unicorns to be overvalued

Unicorn: Für viele VCs überbewertet © Meritt Thomas on Unsplash

Speedinvest recently published the results of the largest survey to date among European investors (VCs) on the status quo of the industry. In its survey, the venture capital fund, together with the Technical University of Munich, collects the views of 437 individual investors throughout Europe and thus provides information about the approach of European venture capitalists to startup investments – and their assessment of the ecosystem in Europe compared to the US American counterpart in the currently challenging market. One result of the survey is sobering: 84% of investors believe that Europe’s unicorns are overvalued.

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The management team – a key factor for investors

The Speedinvest study revealed clear priorities that young companies have to focus on if they want to be considered for financing. About 49% of the VCs surveyed, support the idea that the management team of a startup is the most important factor in an investment decision. 42% of VCs share that they follow their gut feeling about whether or not to invest when they first meet with a management team. This underlines that the first impression counts.

The investors also name three key factors in the evaluation of startups. First, the probable exit from the company (31%), second, the desired ownership interest (30%), and third, the evaluation of comparable investments (30%). More than 65% of respondents said they set ratings based on their desired ownership percentage.

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Europe is a highly fragmented ecosystem

Speedinvest also analyzed the perspective of venture capitalists on the entire ecosystem. Compared to the US, 70% said that Europe’s greatest strength lies in its education system and academic institutions. Talent (65%) and technical know-how (61%) are also considered to be among Europe’s greatest strengths. There is some catching up to do with the US in the areas of capital markets and exit conditions (75%), maturity of the ecosystem (62%), private limited partner funds (59%), and the regulatory environment (51%).

The survey also shows that a sizeable majority (87%) of venture capitalists believe that Europe is a highly fragmented ecosystem, relying on regional hubs. This makes it difficult to maneuver investments. The majority of investors cite cultural differences (70%), the maturity of local ecosystems (68%), and the regulatory environment (65%) as the main reasons for this fragmentation and current challenge.

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Europe – startup scene with an enormous potential

Nevertheless: The complexity of the European markets does not seem to pose an obstacle for international financiers. After all, 76% of VCs report that, despite the volatile market environment, there is an influx of US investors to Europe. This indicates an ever-growing appetite for investment in Europe.

“Despite the relatively young ecosystem, Europe offers enormous potential. The continent attracts new investment opportunities, passionate founders, and access to talented professionals from renowned technical universities. The proximity to low-cost engineers is also a great advantage. 

Europe promises market leadership, high quality of life and attractive investment opportunities for US and international investors. Despite challenges such as fragmentation, limited funding, and differences in the talent pool, the potential is undeniable,” says Andreas Schwarzenbrunner, Partner at Speedinvest, who led the research project.

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