venture transaction multiples - france 2017 edition · 2018-05-22 · © 2017 avolta partners //...

Venture Transaction Multiples – France 2017 Edition © 2017 Avolta Partners // www.avoltapartners.com

Venture Transaction MultiplesFrance 2017 EditionHow Much Is Your Startup Worth ?

#fintech #delivery/logistics

#medtech/biotech

Venture Transaction Multiples – France 2017 Edition © 2017 Avolta Partners // www.avoltapartners.com 2

is the median EV/Sales multiple observed in French venture capital, based on all the fundraising transactions in the hexagon in 2014, 2015and 2016. With 2.00x 1st quartile and 10.37x 3rd quartile.

Venture capital is a game of portfolio returns: each deal is unique and the only fair value is the price that investors are ready to pay for equity stakes. Yet, asthe French market is booming (it became the second behind the UK in Europe) and more specialised funds appear, competition for deals rises and the needfor rationality becomes crucial when it comes to valuation.

After screening 1,481 deals representing €5.2bn value and analysing their private structuration, we do believe there exist consistent EV/Sales ranges perbusiness model. Since VC investors value future FCFF in 5-10 years with an exit strategy, it is no surprise they better value €1 revenue based onmanufacturing models with high gross margin than €1 revenue based on ecommerce models (buy and resell) for example.

Last year, we published our first study on VC transaction multiples, based on FR 2015 deals analysis. The results were well-received by investors, advisors andentrepreneurs: it gave more transparency to the market and outlined the premises of transaction financial comparables applied to startup investments.

We believe generalising the multiples approach in venture capital with comparable transactions EV/Sales contributes to a more efficient ecosystem,assessing the risk and fairly distributing the value between entrepreneurs and investors.

In this edition, we deepened our approach per business model, per focus and over time. We decided to make the report public and free to make our bestefforts in correcting the existing market information asymmetry. It is time for some investors and entrepreneurs to better align to the valuation market.

In this edition, we also produced research notes per key focus and we observed premiums / discounts when analysing EV/Sales. The VC market anticipatesfuture trends in M&A so it is a cyclic and heterogeneous market by nature. For example, investments in artificial intelligence, delivery/logistics and mobility arelikely to be well-valued today since consolidation is expected in these markets within the next 5-10 years. Understanding these trends over time allows tounderstand evolution and disparity in multiples with an analytic approach instead of adopting the unsatisfying tech-bubble speech.

Avolta Partners team, 9/26/2017

4.48x

Avolta PartnersEdito


Bpifrance Le Hub x PwCOur supports

§ Given our position at the heart of the ecosystem and our strong experience and expertisein venture capital at Bpifrance Le Hub, we aim at creating key partnerships and multiplybusiness opportunities in order to accelerate innovation and growth, particularly byproviding practical and useful tools to the diverse stakeholders involved in the ecosystem.

§ We work on best practices by bringing together startups, corporates and VCs in a taskforce to share their insights on business experiences. We implement the gatheredinformation in practical and ready-to-use tools such as smart contracts or CorporateVenture Capital term sheets, in order to smooth friction and improve collaborationbetween startups and corporates.

§ In this spirit and with the profound ambition to conciliate the traditional economy with theinnovative French ecosystem, Bpifrance Le Hub teamed up with Avolta Partners in orderto promote data-driven knowledge on the venture capital market. A sector still cruellylacking transparency despite the importance of the startup valuation matter.

§ We are proud to make data accessible to all the ecosystem by distributing this study.You will find here the results of Avolta Partners researches and analysis gathered in thesecond edition of their study on “Venture Transaction Multiples”. We’re convinced thatthose findings will participate in reducing the current asymmetry of information ruling theventure capital market.

§ This document will help entrepreneurs get a better and fair idea of the valuation of theirorganization, and corporates not to over-value or undervalue startups. We’re confidentthat it will lead to a better mutual understanding between market players and therefore tonew business opportunities.

PwCBpifrance Le Hub

§ PwC strongly supports business competitiveness in France and buys into the belief thatinnovation and entrepreneurship should be promoted and encouraged nationwide tounveil tomorrow’s leaders.

§ Smart Up is a multidisciplinary PwC offering which aims at accompanying France-basedstartups at each stage of their growth. The approach taken by our teams is aligned withthe specific culture, priorities and entrepreneurial vision that are unique to these newplayers on the French business scene.

§ Our Smart Up teams accompany entrepreneurs throughout the development of theirbusiness, from the drafting of their Articles of Association to their IPO, including theestablishment of shareholders’ agreements, pitch training, preparing the accounts,auditing the financial statements or fundraising, for example. PwC also assists startups todevelop experiences specifically adapted to evolving user demand (connected objects,interfaces, physical spaces, services, etc.) via design thinking and creative collaboration.

§ Smart Up’s credibility is strengthened by its positioning in two separate segments of theecosystem: at the early stage, thanks to its “DIVN” (pronounced “dive-in”) incubator, andby boosting proven model startups (generally internationally) thanks to thePwC Accelerator.

§ Smart Up has built a strong presence in the ecosystem by entering into partnerships,sponsoring events and intellectual contributions. Our support to Avolta Partners study onstartup valuation is a perfect example of these actions, a research which will no doubtprovide valuable and useful insights to the ecosystem’s stakeholders.

premium sponsordistribution partner


9 business models

§ Subscription: SaaS or more traditional licensing recurring revenue§ Commission: platform debiting a defined cut from its flows§ Performance: built around usage from a recurring user community§ eCommerce: buy and online resale of goods§ Manufacturing: production and resale of goods§ Retail: resale of goods through brick-and-mortar shops§ Audience: traffic-based revenue§ Service: margin between labour cost and service invoice price§ Research: strong R&D focus to keep high barriers to entry

Building a platform for VC corporate finance

Avolta Partners was rated the most active M&A boutique and fundraising specialistin Europe in the Tech Industry (Business Insider, Feb-17). With 45 deals closed in 4years, we chose from the beginning to be pan-European and data-driven. So webuilt Avolta Intelligence, a unique platform to automate processes and scale ourability to help fast-growing tech companies in Europe.

Our platform concatenates European deals in the Tech Industry with information onvaluation, revenues and structuration. We source this private data from our networkof providers, business partners and investors, combining it with unique insights fromour team of analysts.

Avolta Intelligence is used by professional funds, specialised boutiques and startupsto gain knowledge on valuation, competitors investment thesis and dealopportunities.

€5.2bn. 1,481 deals. 1,312 investors.

We monitored 1,481 deals in 2014, 2015 and 2016 in France. When adding a dealto our platform, we categorize startups according to their business model and weassociate multiple tags with specific focuses. For each deal >€1m we then calculateEV/TTM revenue transaction multiples.

Equity Value pre money (EV):Calculated as PPS * NOSH with PPS the price per share voted for capital increase(nominal + premium) and NOSH the number of outstanding shares before issuance.

Trailing Twelve Month (TTM) revenue:Pro temporis revenue calculated as (12-M) * R(N-1) /12 + M * R(N) / 12, with M themonth of the shareholder’s Assembly voting capital increase, R(N) the revenue forthe year of fundraising and R(N-1) the revenue in preceding year.

Data. Data. Data.Methodology

1,481 startup fundraisings monitored

877 fundraisings > to €1m

718 startups with legal information disclosed

454 transaction multiples


Global Trends


157.2

336.7

213.6 218.6

338.9

455.6

624.7

385.7

549.0463.1

696.4774.0

0

20

40

60

80

100

120

140

160

180

200

0

100

200

300

400

500

600

700

800

900

2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4

6

French venture capital is boomingGlobal Trends

French tech startups booming activity

With more than €5.2bn raised in 1,481 transactions over the past three years, investments have more than doubled in 2016 compared to 2014 (39% CAGR in value). France hasrisen to the second rank in Europe, before Gerrnany and behind the UK.

Amount (€m) No. of deals


The long journey of an entrepreneurGlobal Trends

Startup lifetime and average waiting period at each stage of funding story

39 months is the average waiting period between creation date and the Series A. Once you have reached this point, the typical time-to-Series B is about 19 months. Beyond thispoint, the access to capital becomes easier for the companies needing additional equity financing.

0

5

10

15

20

25

30

35

0

100

200

300

400

500

600

700

800

0 20 40 60 80 100 120

No. of months

No. of deals

Med. amount raised (€m)

30 more and you are on the road

to become a unicorn

39-months « no man’s land » before

finding your first institutional VC

Just 19 more to see the light at the end of the

tunnel

Median time to Series A

Median time to Series B

Median time to Series C

0.5 0.5 0.5

1.52.0 2.0

5.2 8.0 6.0

5.0

25.0 14.2

0

1

2

3

4

5

6

7

8

9

10

2014 2014 2015 2015 2016 2016 2017

No. of years since creation

2014 2015 2016

Median deal size (€m) Seed Series A Series B Series C+

No. of deals Amount (€m)


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

8

2016

2015

2014

Annual deals distribution by decreasing size

Invested amounts / annual investments

10% deals driving 60% investmentsGlobal Trends

Volume (No.)

Value (€m)

Avg. new money distribution by deal (€m)

2014 2015 2016 Total

Seed 211 225 270 706

Series A 129 198 227 554

Series B 30 51 73 154

Series C 17 10 17 44

Series D+ 7 5 11 23

Total 394 489 598 1 481

Volume (No.)

2014 2015 2016 Total

Seed 149,5 146,9 196,1 492,5

Series A 325,3 558,4 700,1 1 583,7

Series B 177,9 488,2 899,2 1 565,4

Series C 164,3 327,3 281,1 772,7

Series D + 110,0 280,0 402,2 792,2

Total 927,0 1 800,9 2 478,7 5 206,5

Value (€m)

2014 2015 2016 Total

Seed 0,7 0,7 0,7 0,7

Series A 2,5 2,8 3,1 2,9

Series B 5,9 9,6 12,3 10,2

Series C 9,7 32,7 16,5 17,6

Series D + 15,7 56,0 36,6 34,4

Total 2,4 3,7 4,1 3,5

New money (€m) distribution by deal

Investments are concentrating. And it is goodnews for VC returns.

There are an increasing number of articles in pressmentioning large rounds and several analystsblogged about funds consolidation and increase inSeries A/B deal size.

Figures indeed support this hypothesis: theproportion of large rounds is relatively moreimportant YoY.

Venture capital is structurally concentrated: 10%top deals drive 60% investments. And despite thebooming in long tail deals, VCs tend to concentrateinvestments in leader startups to optimise theirlion’s share.


Focus relative growthGlobal Trends

50

100

150

200

250

300

2014 2015 2016

#B2B-SaaS

Hot tech!

We identified 11 trending tags with highrecurrence. We then indexed the numberof annual deals per focus on 2014 index100. This chart highlights the hottest topicsin VC right now: artificial intelligence,delivery/logistics, fintech, jobbing andtransportation/mobility.

No. of deals 2014 index 100


200

2000

1 2 3 4 5 6 7

10

Focus investment patternsGlobal Trends

Trajectories

Number of dealsAverage new money raised (€m)

#fintech

#AI

#ecommerce

#transportation/mobility

#B2B-SaaS

#medtech/bioTech

#delivery/logistics

#cleantech

#jobbing

#adtech

2014

2015

2016

3.5

3800

#edtech

Average TTM revenue (€k)Log scale

#ecommerce: work more, get lessThe avg. TTM revenue has increased from €3.9m to€10.2m, while the avg. new money has decreasedfrom €3.3m to €2.0m.

#adtech: towards consolidationThe avg. TTM revenue has increased from €0.8m to€4.6m, while the avg. new money has increasedfrom €1.2m to €4.4m.

#fintech: the boomerang effectThe avg. TTM revenue has increased from €0.3m to€2.5m, while the avg. new money has firstincreased from €1.8m to €4.4m before decreasingto €3.1m.

#delivery/logistics: chasing winners-take-allThe avg. TTM revenue has increased from €0.8m to€1.7m, while the avg. new money has increasedfrom €1.2m to €3.2m.

#medtech/biotech: in R&D we trustThe avg. TTM revenue has increased from €0.4m to€0.8m, while the avg. new money has increasedfrom €3.9m to €6.2m.

#jobbing: highly-fragmented offerThe avg. TTM revenue has decreased from €4.6mto €0.7m, while the avg. new money has increasedfrom €2.5m to €3.1m.

Consolidate monopolyHedge the risk

All-inSpray & pray


% annual deals

No. of deals (relative)No. of deals (absolute)

Invested amount (absolute)Invested amount (absolute)

No. of deals

Invested amount (€m) % annual invested amount

242

294331

128 146

240

0

50

100

150

200

250

300

350

2014 2015 2016

65% 67%58%

35% 33%42%

0%10%20%30%40%50%60%70%80%90%100%

2014 2015 2016

504.6

969.2

1 423.9

299.0

543.8

981.7

0200400600800

1 0001 2001 4001 600

2014 2015 2016

63% 64% 59%

37% 36% 41%

0%10%20%30%40%50%60%70%80%90%100%

2014 2015 2016

B2B vs B2CGlobal Trends

B2C rocks!

On average, over the last three years,B2B startups accounted for 63% ofFrench deals and dragged 62% ofamounts raised.

While B2C is still lagging behind, 3-years trends show it is now catchingup, with the B2B/B2C split trending to50%/50%.

To date, considering the number ofdeals, B2B has experienced a 17%CAGR from 2014 to 2016. Meanwhile,B2C increased at a steeper 37%CAGR.

The observation also applies tovolume raised with B2B CAGR of 68%being outranked by vigorous B2C81% CAGR.

B2C momentum is definitely to bestudied in light of the maturation ofpeer-to-peer, on-demand and sharingeconomy-based models whichexperienced a remarkable boomingand powered the thrive of B2C 3.0.

B2C

B2B


1,4%41

Bretagne2,1%50

Pays de la Loire

1,6%60

Nouvelle-Aquitaine

8,7%91

Occitanie

2,1%101

Provence-Alpes-Côte d'Azur

0,1%4

Corse

8,4%143

Auvergne-Rhône-Alpes0,1%6

Bourgogne-Franche-Comté

1,7%41

Grand Est7,0%63

Hauts-de-France

0,5%18

Normandie

0,1%3

Réunion island

64,1%866

Île-de-France

0,1%5

Centre-Val de Loire

12

Global Trends

Regional hubs are building up

Since the FrenchTech initiative has been launched in 2013, regional startup ecosystems haveemerged in 14 different metropolis including Île-de-France.

Over the past 3 years, Paris area has kept holding its crushing leading position, concentrating64.1% of the entire volume raised and 58.4% of total deals. Auvergne Rhône-Alpes, PACA, andOccitanie stand out as very active challengers, with a 41.0% CAGR in regard to amounts raised

Frenchtech hubs

% of total amount raised (2014,2015,2016)No. of deals (2014,2015,2016)

Overyear deal breakdown 2014 2015 2016

Auvergne-Rhône-Alpes 40 45 58Bourgogne-Franche-Comté 1 1 4Bretagne 12 17 12Centre-Val de Loire 2 0 3Corse 3 0 1Grand Est 9 9 13Hauts-de-France 17 23 23Île-de-France 225 285 356La Réunion 1 1 1Normandie 4 7 7Nouvelle-Aquitaine 16 23 21Occitanie 22 33 36Pays de la Loire 14 13 23PACA 30 32 39

1st region Île-de-France Île-de-France Île-de-France2nd region Auvergne-R.A. Auvergne-R.A. Auvergne-R.A.3rd region PACA Occitanie PACA4th region Occitanie PACA Occitanie5th region Hauts-de-France Hauts-de-France Hauts-de-France

>50%

<1%

Volume distribution


Transaction Multiples


Yes! There is financial rationality behind venturetransactions

VC investors value the future FCFF in 5-10 yearswith an exit strategy. The company business modelgives insights on gross margin levels, scalability andpredictability. It is then unsurprising to observecorrelation between BM and EV/TTM revenue.

€1 revenue from commission means €0.9 in grossmargin with scalable GMV.

€1 revenue from subscription means €0.8 in grossmargin with valuable LTV.

€1 revenue from manufacturing means €0.7 ingross margin with promising price differentiation.

€1 revenue from service means €0.4 in grossmargin with un-scalable business.

€1 revenue from performance means €0.5 in grossmargin with both lucrative and hazardous usercommunity.

€1 revenue from ecommerce means €0.5 in grossmargin with costly repeat.

€1 revenue from audience means €0.9 in grossmargin with limited opportunity for growth anddiversification.

14

Transaction MultiplesTech valuation snapshot

Q1 Q3Med.

EV/TTM revenue per business model

3.1x

2.7x

1.2x

4.4x

2.9x

3.3x

2.7x

2.2x

0.8x

1.8x

5.9x

15.8x

5.6x

6.6x

9.3x

14.8x

11.3x

7.6x

18.5x

4.0x

5.5x

18.9x

0.0x 5.0x 10.0x 15.0x 20.0x

#fintech


#B2B-SaaS

#delivery/logistics

#cleantech

#adtech

#jobbing

#AI

#ecommerce

#edtech

#medtech/biotech

4.3

1.1x

1.1x

2.0x

2.3x

0.7x

2.3x

3.4x

2.4x

5.9x

2.3x

15.4x

13.9x

2.6x

10.8x

15.3x

8.4x

0.0x 10.0x 20.0x 30.0x

Subscription

Commission

Performance

eCommerce

Manufacturing

Audience

Research

Retail

Service

43.5x

EV/TTM revenue per focus

4.5x

8.3x

4.6x

1.1x

4.9x

3.3x

1.7x

2.2x

15.7x Median


New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

15

36.8 110.7 98.2

20

25 32

0

5

10

15

20

25

30

35

0

20

40

60

80

100

120

140

2014 2015 2016

1.8

Sector median FR median

4.4 3.1

€3.2m

€7.8m

26%€0.5m

10.4x

§ Investment dynamism in #fintech is contrasted: while the number of deals increased YoY,both value (-11%) and average new money (-30%) notably decreased from 2015 to 2016

§ This may be – after 2015 peak – the sign of a relative temperance from investors in the#fintech race, as new players are less likely to be successful in an increasingly-consolidated market

§ Even if the median TTM revenue over the 3-years period stays low at €0.5m, the averagerose from €0.3m in 2014 to €2.5m in 2016, supporting the consolidation thesis

§ Nevertheless, the EV/TTM multiples analysis gives a 10.4x median multiple far superior tothe cross-sector 4.5x median, outlining the still-promising M&A opportunities

§ Subscription models in #fintech benefit from an outstanding valuation premium: they arevalued around 3 times more than overall subscription businesses

Transaction Multiples#fintech

Invested amount (€m) Avg. deal size (€m)

Investment trendResearch note

Median deal analysisVenture Transaction Multiples

#fintech18.89x5.93x

Subscription

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x

Commission

Q1 Q3Med.

BM

BM x Focus

Med.Q1 Q3

25.75x10.37x

16.49x5.55x

# of deals

Most active investors


Transaction Multiples#AI

Invested amount (€m) Avg. deal size (€m)



New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

9.7

65.6 68.310

2528

0

5

10

15

20

25

30

35

0

10

20

30

40

50

60

70

2014 2015 2016

1.0

Sector median

2.6 2.4

€1.0m

€3.8m

27%€0.5m

3.5x

# of deals

8.0x6.0x4.0x2.0x0.0x

#AI

Subscription

5.50x1.77x

§ #AI is booming: investments value increased from €10m in 2014 to €68m in 2016 (fastestgrowing sector) and already €115m (30+ deals) have been raised since Jan-17

§ Investors unsurprisingly occupied this field as unequaled scalability and countless newbusiness applications seem to pave the way for successful exits in the coming years

§ There is a high proportion of pre-revenue deals (48% vs overall 34% in 2016) and themedian TTM revenue is relatively low (€0.5m), highlighting the relative youth of deep techand the importance of IP valuation

§ Paradoxically, deals in #AI are valued on a median 3.5x EV/TTM revenue, slightly belowthe cross-sector median multiple: investors are still cautious and need to acquire furtherexpertise for their due diligence

§ Subscription models valuations in #AI are consistent with overall subscription multiples

FR median

Q1 Q3Med.

Med.Q1 Q3

7.07x2.35x


BM

BM x Focus


2.0x0.0x 4.0x 6.0x 8.0x

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

17

142.4 112.8133.9

43 4266

0

10

20

30

40

50

60

70

80

0

20

40

60

80

100

120

140

2014 2015 2016

Invested amount (€m) # of dealsAvg. deal size (€m)

3.3

Sector median

#ecommerce

eCommerce

3.99x0.82x



2.7 2.0

€1.1m

€4.0m

24%€2.0m

1.5x

Transaction Multiples#ecommerce

Commission

Manufacturing

§ #ecommerce is relatively steady in volume and value (€134m in 2016 for 66 deals), whilethe average new money has been notably decreasing from €3.3m in 2014 to €2.0m

§ In the meantime, the €2.0m median TTM revenue is outstandingly high compared tooverall median and the average has been increasing from €3.9m to €10.2m

§ Investors commit smaller tickets for companies with higher TTM revenue: they typicallyhedge the risk in this mature sector and focus on profitable businesses as M&Aopportunities drastically decreased

§ The median 1.5x EV/TTM revenue is very low compared to the cross-sector medianmultiple as gross margins are relatively small with hard-to-scale revenue model and highfixed costs related to logistics

§ All BM median multiples experience a heavy discount when applied to #ecommerce

FR median

2.17x0.74xQ1 Q3

Med.

Med.Q1 Q3

1.66x 5.90x

0.96x 8.12x


BM

BM x Focus


10.0x0.0x 20.0x 30.0x

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

18

132.2

297.4

212.4

3436

51

0

10

20

30

40

50

60

0

50

100

150

200

250

300

2014 2015 2016


3.9

Sector median



8.3 4.2

€2.0m

€6.0m

26%€1.1m

6.5x

Transaction Multiples#transportation/mobil ity


Subscription

18.45x2.24x

Commission

Manufacturing

§ #transportation/mobility is a trending topic: the number of deals rose from 34 in 2014 to51 in 2016, reaching €212.4m in value (the €297m 2015 peak funding was due to€197m Blablacar Series D)

§ The dynamics in mobility are fueled by the shift towards sharing usages, smart-citiesprograms and the continuous technological improvements in real-time fleet management

§ The €1.1m median TTM revenue is relatively high and underlines the attractiveopportunities for rapid monetization in these businesses: specialised investors (Via-ID,PSA, EMV) have accelerated their investment pace and are increasingly seduced byplatform models based on daily usage

§ Consequently, the 6.5x median EV/TTM revenue show a relatively well-valued sector,with a strong premium for commission-based models

FR median

10.52x 32.43x

3.17x0.98xQ1 Q3

Med.

Med.Q1 Q3

3.13x 21.86x


BM

BM x Focus


8.0x6.0x4.0x2.0x0.0x

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

19

175.1

298.1423.1

97102 131

0

20

40

60

80

100

120

140

050

100150200250300350400450

2014 2015 2016


1.8

Sector median

#B2B-SaaS

Subscription

7.58x2.66x



2.9 3.2

€1.5m

€4.1m

28%€0.9m

4.7x

Transaction Multiples#B2B-SaaS

§ #B2B-SaaS is a steady growing sector with investments value reaching €423m in 2016for 131 deals, while the average new money has doubled from 2014

§ The €0.9m median revenue follows the general observation with a slightly superiormedian new money: investors are confident in committing high tickets on smallcompanies since B2B and recurring revenue reduce hazards (hypothesis supported bylow multiples dispersion)

§ The #B2B-SaaS EV/TTM revenue median is highly correlated with the subscription BMeven though a little higher and quartiles are less dispersed

§ #B2B-SaaS models are notably well-valued by specialised investors for their recurringrevenue, their easy-to-read key metrics and their scalability, combined with theiranticipated smoothed exit via M&A software integration

FR median

Q1 Q3Med.

Med.Q1 Q3

7.58x2.66x


BM

BM x Focus


New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

20

15.5

90.7107.214

23

33

0

5

10

15

20

25

30

35

40

0

20

40

60

80

100

120

2014 2015 2016

1.13.9 3.2

€1.1m

€4.9m

29%€0.7m

5.9x

§ #delivery/logistics is booming: investments value increased from €15m in 2014 to €107min 2016 (second fastest growing sector) with 91% CAGR in value, and the average newmoney notably rose from €1.1m to €3.2m

§ Data points out an attempt of consolidation in a still-fragmented market, investors in#delivery/logistics tending to make the bet on winners-take-all

§ The €0.9m median TTM revenue and the €1.1m median new money are in line withgeneral observations while the median EV/TTM revenue significantly exceeds the marketbenchmark: in their chase for winners, investors agree to pay a higher price but 2017should separate the wheat from the chaff

§ Interestingly, the sector was historically focused on B2B and is now shifting towardsB2C, fueled by the remarkable dynamism of on-demand and ultra-flexible offers

Transaction Multiples#delivery/logistics




#delivery/logistics

Subscription

11.25x3.27x

Commission

Manufacturing

0.0x 5.0x 10.0x 15.0x 20.0x 25.0xSector median FR median

1.91x 7.47x

4.18x 18.05x

34.38x5.94xQ1 Q3

Med.

Med.Q1 Q3


BM

BM x Focus


Research note

Venture Transaction Multiples

§ Investments in #cleantech are rebounding after a deceptive year in 2015, with €163minvested in 55 deals in 2016, while the average new money has slightly evolved from€2.1m to €3.0m in 2016

§ COP 21 major announcements and Mayor projects in smart-cities may have triggered asecond wind to the sector but investors remain cautious in their diversification

§ The median €0.5m TTM revenue shows a fragmented market with important needs forequity funding before generating revenue

§ Manufacturing is with no surprise the predominant business model with multiples in linewith the overall sector figures

§ But the most valued companies in #cleantech are based on performance models (17.8xEV/TTM revenue) with focus in eco-mobility and energy efficiency

Transaction Multiples#cleantech

Investment trend

Median deal analysis

121.1102.3

162.9

57

41

55

0

10

20

30

40

50

60

70

80

020406080

100120140160180

2014 2015 2016

2.1 2.5 3.0

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

€1.3m

€4.2m

27%€0.5m

5.1x


#cleantech

Manufacturing

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x

Performance


21.95x3.59x

14.77x2.96x

26.77x10.36x

Q1 Q3Med.

Med.Q1 Q3


BM

BM x Focus


Transaction Multiples#jobbing

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

34.8

76.7

67.514

2522

0

5

10

15

20

25

30

0102030405060708090

2014 2015 2016


2.5

Sector median



3.1 3.1

€1.2m

€3.9m

28%€0.9m

5.3x

§ Investments in #jobbing platforms rose from €35m in 2014 to €68m in 2016, while theaverage new money remained steady around €3m

§ The median €0.9m TTM revenue shows the emergence of a crowded fragmented offer:this analysis being supported by the observed average TTM revenue collapsing from€4.6m in 2014 to €0.7m in 2016

§ Investors have been highly enthusiastic with the transition from brick-and-mortaragencies to on-demand marketplaces with lean cost structure, and they now tend toincrease their risks by investing similar significant ticket in smaller companies

§ Whereas subscription-based models are valued in line with the general BM multiples(4.9x median EV/TTM revenue), commission-based platforms can count on a significantpremium with median 10.7x multiple

15.0x12.0x6.0x0.0x 20.0x

#jobbing

Subscription

9.25x4.37x

Commission

FR median

21.84x7.78x

Q1 Q3Med.

Med.Q1 Q3

5.86x4.02x


BM

BM x Focus


Transaction Multiples#adtech


Median deal analysis

§ #adtech investments boomed in 2015 with the number of deals increasing from 19 to 40before decreasing to 28 in 2016, while the average new money notably rose from €1.2mto €4.4m over the 3-year period

§ By investing more money on less key players, VCs seem to draw the path towards sectorconsolidation

§ The median TTM revenue follows a clear upward trend going from €0.4m in 2014 to€2.0m in 2016, highlighting the emergence of leading actors

§ The median multiple collapses from a high 3.9x in 2014 to a low 1.7x in 2016 as themarket seems to be mature and offer fewer long-term M&A opportunities

§ #adtech businesses interestingly tend to have a better valuation when opting forperformance as business model (CPC/CPM/CPA)

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

22.7

109.7123.2

19

40

28

05101520253035404550

0

20

40

60

80

100

120

2014 2015 2016


2.7 4.4

€1.3m

€4.9m

27%€1.3m

3.3x

Venture Transaction Multiples

#adtech

Subscription

0.0x 2.0x 4.0x 6.0x 8.0x 10.0x

Performance

6.62x1.18x

4.59x1.47x

8.84x2.59x

Q1 Q3Med.

Med.Q1 Q3



1.2

BM

BM x Focus


Transaction Multiples#edtech

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

18.4 18.5

77.31922

24

0

5

10

15

20

25

30

0

10

20

30

40

50

60

70

80

2014 2015 2016


1.0 0.83.2

€0.8m

€3.0m

29%€0.8m

4.0x

§ #edtech is taking advantage of bullish trends with amounts raised going from steady€18m levels in 2014 and 2015 to a four-fold €77m level in 2016, fueled by high series B

§ In the light of the US #edtech booming, French investors are trying to identify leaders-to-be but still remain pretty skittish

§ The €0.8m median TTM revenue is slightly above the general observation while themedian new money is below general levels also at €0.8m: #edtech startups record highermedian revenues but close relatively smaller rounds

§ Despite comforting subscription models, investors tend to apply a discount to #edtechmultiples, particularly narrowed around the median 3.7x EV/TTM revenue

§ This low-valuation spiral could be broken thanks to successful M&A exits and theemergence of disruptive business models



8.0x6.0x4.0x2.0x0.0x

#edtech

Subscription

5.56x2.68x

4.31x2.00x

Q1 Q3Med.

Med.Q1 Q3



BM

BM x Focus


Transaction Multiples#medtech/biotech

New money

Pre money

valuation

DilutionTTM revenue

EV/TMM

145.4192.6

330.937

5053

0

10

20

30

40

50

60

0

50

100

150

200

250

300

350

2014 2015 2016

€2.0m

€10.9m

33%€69k

8.2x

§ #medtech/biotech startups are riding an upward trend: 2016 is a boom year with volumeraised 170% higher than in 2015 (explained by very large series B in Q2)

§ With seed investments slightly reduced in 2016 in comparison to 2015 (-20%) and seriesB+ experiencing a tremendous increase (+252% in volume compared to 2015), investorsseem to focus on more mature companies

§ Research is logically the most frequent business model (54% in number of deals, 71% involume raised) and explains why the #medtech/biotech median TTM revenue is that lowcompared to overall median levels at €0.07m

§ With very high median pre-money valuation and uncommonly low revenue figures, TTMmultiples are very diffuse around the 15x median level

§ When excluding research BM, dispersion is dramatically reduced around the 6.6x median




#medtech/biotech

Research

0.0x 10.0x 20.0x 30.0x 40.0x 50.0x

All but Research

3.96.2

3.9

11.70x2.64x

43.46x4.30x

Q1 Q3Med.

Med.Q1 Q3



BM

BM x Focus

15.82x3.08x


Avolta insights


Audience

Avolta insightsMedian EV/TTM revenue mult iples over t ime per BM

Commission eCommerce

Performance

Retail

Manufacturing Research

Service Subscription

10.76x

1.92x3.68x

0

5

10

15

2014 2015 2016

4.92x6.54x

9.85x

0

5

10

15

2014 2015 2016

1.10x 0.98x 1.41x

0

5

10

15

2014 2015 2016

6.61x 5.68x3.90x

0

5

10

15

2014 2015 2016

9.97x

4.60x 5.64x

0

5

10

15

2014 2015 2016

27.48x

4.30x

35.66x

0

10

20

30

40

2014 2015 2016

1.08x 1.92x

0

5

10

15

2014 2015 2016

5.22x2.13x 1.09x

0

5

10

15

2014 2015 2016

5.44x 4.22x 4.30x

0

5

10

15

2014 2015 2016

Median EV/TTM revenue multiple Median EV/TTM revenue multiple Median EV/TTM revenue multiple

Median EV/TTM revenue multipleMedian EV/TTM revenue multipleMedian EV/TTM revenue multiple

Median EV/TTM revenue multiple Median EV/TTM revenue multiple Median EV/TTM revenue multiple


§ Commission-based models are particularly well-valued with a 8.26x median multiple (vs4.49x for subscription and 1.14x for ecommerce)

§ EV/TTM revenue multiples are driven up by P2P-focused startups, with an observedmedian 17.79x multiple, as investors tend to value the scalable GMV generated by theseplatforms with little cost structure for the company

§ Among the commission-based startups, #transportation/mobility and #on-demand raisedsignificantly higher amounts of new money for higher TTM revenue, on a higher 12.57xmedian multiple

§ P2P, #transportation/mobility and #on-demand gather similar criteria to maximize thepotential value of revenue for investors: scalability, efficient user acquisition, large userbase and strong repeat business

Avolta insightsFocus on commission models

2

4

6

8

10

12

200 400 600 800 1000

fintechx Commission

GeneralCommission

Median Multiple

Median TTM (€m)

Commission

On-demand/sharing

15.28x3.38x

Transportation/mobility

Transportation/mobility and on-demand snapshot

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x

ecommercex Commission

On-demandx Commission

Mobilityx Commission

Median multiple per focusResearch note

Commission deal breakdown

4.39x 4.51x

17.79x

3.90x8.19x

17.79x

0.0x

5.0x

10.0x

15.0x

20.0x

#B2B #B2C #P2P

Overall Commission

Median NM (€m)

Marketplacex Commission

Median multiple

Q1 Q3Med.

Focus

Commission x Focus

Med.Q1 Q3

32.43x10.52x

22.01x6.10x


y = 1.6638x + 2.1567R² = 0.44428

0

2

4

6

8

10

12

14

16

18

0% 100% 200% 300% 400% 500% 600% 700%

y = 8.8212xR² = 0.46595

-1 000

4 000

9 000

14 000

19 000

24 000

29 000

-200 300 800 1 300 1 800 2 300 2 800 3 300 3 800

29

Avolta insightsA closer look at valuation in #B2B-Saas

MRR x Actual new moneyEV/TTM revenue x annual growth

Actual new money (€k)

MRR at fundraising (€k)

Pre money valuation

EV/TTM revenue

Annual growth


The #adtech market is getting mature

After a first year of experimentation in2014, the market went crazy about#adtech in 2015. 40+ deals were madeand EV/TTM revenue multiplesskyrocketed to a high 21.42x. In 2016,investments were slightly superior in value(€123m) but concentrated on lesscompanies.

The clear decrease in valuation multiplesbetween 2014 and 2016, combined withthe average TTM revenue increase,highlights the fact that excitement of thebeginning has given way to a maturemarket shifting from fragmentationtowards consolidation.

Supporting this thesis, the number ofacquisitions in the sector has notablyaccelerated.

6

8

10

0

2

4

6

8

10

2014 2015 2016

€1.2m

€2.7m

€4.4m

€0.8m

€3.9m

€4.6m

3.9x

3.4x

1.7x

0.0

1.0

2.0

3.0

4.0

5.0

2014 2014 2015 2015 2016 2016 2017

30

Towards consolidation in #adtechAvolta insights

Avg. TTM revenue

Avg. new money

Med. EV/TTM revenue No. of M&A deals in #adtech


0

20

40

60

80

100

Manufacturing

Research

Commission

#AI

We found 105 deals between 2014 and 2016 with > €1m new money and underlyingbusiness generating < €100k revenue. These “pre revenue” deals can be classified into fourmain categories:

Research: Unsurprisingly, investors are comfortable with committing high tickets intoresearch-based models – especially applied to #medtech/biotech – even after Series A, as IPand patents promise high barriers to entry and profitable future business

Manufacturing: Companies in #industry, #cleantech, #medtech/biotech and #ecommercecan succeed in raising money from investors to prototype their hardware or install their brand(Series A) but need to generate revenue when going to the next equity round: so long time-to-market prototyping better rely on solid IP

Commission: Some companies in #marketplace, #fintech and #on-demand/sharing canraise significant Series A without revenue if demonstrating their need for critical size beforemonetization

#AI: Around 50% deals in #AI are considered as “pre revenue”, outlining both the sectorearly stage and strong investors’ appetite

31

Avolta insights

Series A Series B+

Research note Pre revenue fundraisings

Pre revenue deals in volume (index 100)

#ecommerce #cleantech #fintech #IA #impact #marketplace #adtech #medtech/biotech

#on-demand/sharing


Audience 0 0 0 7 0 0 0 0 0 0Commission 3 3 13 0 0 20 0 0 13 7eCommerce 3 3 0 0 0 3 0 7 0 0IoT 0 0 0 0 0 0 0 0 0 0Manufacturing 10 43 0 7 3 0 0 27 0 3Performance 0 0 3 0 0 7 0 0 3 7Research 0 3 0 0 0 0 0 100 0 0Retail 0 0 0 0 0 0 0 0 0 0Service 0 0 0 0 0 0 0 0 0 3Subscription 3 0 3 7 7 10 13 3 3 3

Amount raised through pre revenue deals (€m)

Seed

Pre revenue deals analysis


31%10%

51%

35%

33%

45%

42%

16%

38%

14%

39%

0% 10% 20% 30% 40% 50% 60%

#fintech

#AI

#ecommerce


#B2B-SaaS

#delivery/logistics

#cleantech

#jobbing

#adtech

#education

#medtech/biotech

(new money in press – actual new money) / (actual new money)

32

Avolta insightsNew money bullshit gap

Little white lies are part of the game

We went through fundraising legal documentationof startups and compared the actual equity raisedto the amount declared in the press. We thencomputed the percentage of inflation observed,and called it the “bullshit gap”.

Taking all our focuses into account, figurescommunicated on public media are inflated by32% on average.

Startups are not necessarily to be blamed for that.Amounts communicated in the press do not stickto the pure-equity view and often include non-equity money such as subsidies or debt-likeinstruments.

Alternatively, startups also tend to communicateon full-round amounts even if the fundraising isactually done tranche by tranche and that only apart of it has been effectively secured.

32%


Avolta insightsHighest valuation per focus

#fintech

#edtech


#delivery/logistics

#cleantech

#medtech/biotech

#adtech

#jobbing#B2B-SaaS

#AI


y = 3.6342xR² = 0.51153

0

50

100

150

200

250

0 20 40 60 80

y = 4.8086xR² = 0.63697

0

50

100

150

200

0 5 10 15 20 25 30

y = 6.98xR² = -0.2269

0

20

40

60

80

100

0 2 4 6 8

y = 4.577xR² = 0.55122

0

50

100

150

200

0 5 10 15 20 25 30

y = 1.326xR² = 0.66469

05

1015202530

0 5 10 15

y = 0.8898xR² = 0.97497

0

5

10

15

0 5 10 15

y = 2.3969xR² = 0.7198

0

5

10

15

0 1 2 3 4 5 6

Audience

Avolta insightsEV x TTM revenue l inear correlations per BM

Commission eCommerce

Performance

Retail

Manufacturing Research

Service Subscription

y = 8.0846xR² = 0.42588

020406080

100120

0 2 4 6 8

y = 0.8944xR² = 0.74013

0

10

20

30

40

50

0 10 20 30 40 50 60

Pre money valuation (€m)

TTM revenue (€m)


TTM revenue (€m)


TTM revenue (€m)


TTM revenue (€m)


TTM revenue (€m)


TTM revenue (€m)


TTM revenue (€m)


TTM revenue (€m)


TTM revenue (€m)


#B2B-SaaS

y = 4.3672xR² = 0.61868

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0


TTM revenue (€m)

Avolta insightsEV x TTM revenue l inear correlations per focus

#edtech

y = 3.986xR² = 0.59865

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0


TTM revenue (€m)

#adtech

y = 1.2308xR² = 0.21387

0.02.04.06.08.0

10.012.014.016.018.020.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0


TTM revenue (€m)

#jobbing

y = 4.8076xR² = 0.94982

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0


TTM revenue (€m)


Avolta insightsResearch team

Romain MombertJunior Analyst

Lucas PléJunior Analyst

Evan ProuxJunior Analyst

Marianne BeaufilsJunior Analyst

Arthur PorréCo-founder & Managing Partner

Pascal FarrugiaAssociate

Claire CosteSenior Analyst

Baptiste JacobSenior Analyst

Thomas ReygagneHead of Data


Disclaimer

The information contained in this report has been produced by Avolta Partners, based on Diane+ data,BODACC legal data and third party information. While Avolta Partners has made every effort to ensure thereliability of the data included in this report, Avolta Partners cannot guarantee the accuracy of the informationcollected and presented. Therefore, the Avolta Partners cannot accept responsibility for any decision made oraction taken based upon this report or the information provided herein.This presentation is for the exclusive use of the people to whom it is addressed and is intended for generalinformation purposes only. It is not intended to constitute legal or other professional advice and should not betreated as such.Appropriate legal advice must be sought before making any decision, taking any action or refraining fromtaking any action in reliance on the information contained in this presentation. does not assume anyresponsibility for any person’s reliance upon the information contained herein.

© Copyright Avolta Partners September 2017

Avolta PartnersWith 45 deals closed in 4 years, Avolta Partners has proven to be the most active M&A boutique inEurope in the Tech Industry. As a result, our team has learned how to maximise the value of a deal –both valuation and legal conditions – thanks to a proven methodology and hard-nosed negotiations.

for more information contact

[email protected]

or vis i t

www.avoltapartners.com

Bpifrance Le HubBpifrance Le Hub aims at boosting French innovation by multiplying deals between corporates andstartups (partnerships, investments or M&A) in the tech industry. Since our launch in Apr-15, we haveaccelerated 64 startups, accompanied 60 corporates and intermediated 35+ commercial partnerships.

PwCSmart Up is a multidisciplinary PwC offering which accompanies entrepreneurs throughout thedevelopment of their business, from the drafting of their Articles of Association to their IPO, includingthe establishment of shareholders’ agreements, preparing the accounts and financial auditing.

venture transaction multiples - france 2017 edition · 2018-05-22 · © 2017 avolta partners //...

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