Tech transactions

A perspective on Europe’s startup scene – and the Digital Top 50 Awards

Lars Meyer, co-head of Freshfields’ global tech group, shares his insights on Europe’s vibrant startup community, the state of the capital markets – and the awards scheme that takes innovative businesses to the next level.

The European startup scene continues to generate fantastic early-stage companies that emerge alongside already established international champions like Spotify, UiPath, Octopus or TeamViewer. After extraordinary growth in consumer-facing platforms and digital marketplaces, many innovators are now focusing on more specialised applications in fintech or healthtech, with lots also happening in artificial intelligence and in the enterprise software space.

Europe’s investment landscape is evolving, including with the emergence of new investors. Traditional venture capital investors remain very active, but we’re also seeing large-cap private equity sponsors increasingly making investments in startups. Then you have big corporates seeking strategic collaborations, who participate in funding rounds either as a way to collaborate or as a route to a full acquisition. We’ve done a lot of fascinating work in this space, both on large and innovative growth investments and tech M&A deals and on smaller but strategically important transactions for global companies teaming up with startups to develop new products or applications.

Another trend that’s emerged recently is for startups to raise debt instead of equity. The money is coming from a wide range of lenders and financial investors. It is often a route chosen by startups that have reached a certain size and scale, and whose early-stage investors have already added significant value and liquidity.

There’s a lot of divergence in the way European founders think about the life cycle of their company. We’re talking to some early-stage startups who already have a very clear exit strategy and are planning a funding round and a debt raise before converting into a European stock corporation in preparation for an IPO, all in order to raise capital as swiftly as possible to finance their growth or enable acquisitions. If along the way a strategic investor tries to acquire them or a SPAC sponsor proposes a merger into a publicly listed company, then they’ll consider those offers on their merits. At the same time, other startups aren’t thinking that way at all – their products and business models do not require substantial amounts of capital and rapid scaling and so they’re focused on building their product and leaving the rest to take care of itself.

We’ve been involved in the Digital Top 50 Awards, which celebrate the best European startups, for the past three years. In my view they’re clearly among the most ambitious awards out there. It’s a truly pan-European prize - we see hundreds of applications each year from virtually every European country. Our fellow organisers – McKinsey, TeamViewer, 468 Capital and Finsbury Glover Hering – think like us, have similar ambitions and are as keen as we are to contribute to the success of the European startup community and indeed the global tech community. I really enjoy the opportunity to connect with founders and investors and offer them the benefit of our experience as they continue to grow and innovate.

Being involved in the DT50 brings home how quickly the market evolves. We saw lots more purpose-driven companies last year than we have in previous years – perhaps a result of the pandemic, but I expect that to continue. This trend may also be due to the explosion in popularity of ESG investing, but it’s also down to a generation of founders who are looking to contribute to society while benefiting from the success of their innovations. These individuals are serious businesspeople as well as highly ambitious philanthropists.

I find it fascinating to review the entries, to explore new business models that are being created and new disruptions that are emerging. Being on the jury is a lot of fun but it’s also a great challenge – everyone’s very committed to adding value and supporting the entrepreneurs, so it can be quite hard to select winners from each year’s cohort.

If I had any advice for future applicants, it would be to really articulate what makes your idea unique. Perfecting the pitch is essential for any founder engaging with potential investors and business partners, so it’s never wasted effort. It’s not just about the product or innovation – we choose the winners based on an assessment of the founder team and its track record, how scalable and creative a product is, and the attractiveness of the business to investors. We’ve had companies in the top 50 who are three months old but had an incredible product and fantastic backers. We’ve also had companies that are 10 years old but whose time had come. Being named among the Digital Top 50 or even winning in one of the categories is a fantastic recognition of your company’s story so far. The awards are also a valuable conduit to a broad community of advisers, investors and other startups across Europe. You’ll also get free advice from the organisers, which has been real value-add for many of our past winners!

To find out more about the DT50 awards, visit https://www.dt50.org/