Southern Europe's VC industry grows amid pandemic

While some companies had to refocus their activity and rethink their business models, for many startups the coronavirus crisis has created a new wave of interest in their activity.

Despite the challenges and the uncertainty triggered by the pandemic, deals across the venture ecosystem have not been scarce, and many local funds have been willing to bet on these promising opportunities. Compared with 2019, deal value in the early-stage space increased by 58% in 2020, while deal volume rose by 14%, according to Unquote Data.

The most remarkable early-stage investments recorded in recent months included a €30m series-A round for Spanish drug development company Ona Therapeutics, led by Asabys Partners, alongside Alta Life Sciences, BPI France, Fund+ and Ysios Capital; a €28m series-A round for Italian biotech company Enthera Pharmaceuticals, led by Sofinnova Partners and AbbVie Ventures; and a €20m series-B round for medical devices developer InnovHeart led by Panakes Partners, alongside Indaco Venture Partners, CDP Venture Capital and Genextra.

In the later-stage space, the region also recorded several significant deals, including a €93m series-C round for Italian payment app operator Satispay, co-led by Tencent, LGT Lightstone, TIM Ventures, and Square; a €25m investment in Milan-based delivery apps developer Milkman, led by P101, Vertis, 360 Capital, Italia500 and Poste Italiane; and a $21m round for Jeff, a Spanish business development and brand optimisation platform, backed by All Iron Ventures, Alma Mundi Ventures and FJ Labs.

"Despite a general slowdown in dealflow caused by the pandemic, the local market is rich in great opportunities for late-stage projects, especially across the e-commerce, medtech and deep-tech verticals," says Davide Turco, CEO of Indaco Venture Partners. "The pandemic has accelerated the digitalisation of customer habits and channels, allowing our country to bridge the gap to other European countries that were ahead of us. This s a trend that is destined to last and benefit the entire economy."

Fundraising flurry
The strong potential of the venture capital ecosystem has fuelled the fundraising activity of several local vehicles, which were able to attract the interest of loyal and new LPs and hold a final close.

One such example is Programma 102, which targets European digital and technology startups, and closed on €100m in July 2020. The fund has an investor base primarily composed of Italian institutional investors, including Fondo Italiano d'Investimento, CDP Venture, the European Investment Fund (EIF), Fondo Pensione BCC and Cassa Forense – collectively, they make up around 65% of the capital. The remainder was provided by various Italian family offices and private investors, which re-upped from the previous vehicle.

Furthermore, several VC funds were launched in 2020 or held their first close in the last few months and are expected to wrap up their fundraising in 2021. Among others, 360 Capital V held a €90m first close in April 2020 and plans to reach a final close in H1 2021, hitting its €150m target; United Ventures' UV T-Growth Fund was launched in July 2020 with a €150m target and expects to hold a first close at the beginning of 2021; and Vertis Venture 5 Scaleup was launched in February 2020 with a €100m target and plans to hold a first close in Q1 2021.

In Spain, Kibo Ventures III, which has a €120m hard-cap, held its first close in 2020, while Nauta Tech Invest V raised €120m in July 2020 and Seaya Ventures III held an €85m first close in October 2020.

The pandemic has shown everyone the importance of a vibrant technology ecosystem and has sped up digitalisation" – Massimiliano Magrini, United Ventures

Although the pandemic has not yet run its course and a lot of uncertainty remains, the VC industry seems to have largely benefited from the changes triggered by the crisis and it is forecast to flourish in the coming months.

"Some people expected many investors to shy away from early-stage startups, which are considered very high-risk assets, especially in a time of crisis," says Massimiliano Magrini, managing partner of United Ventures. "On the contrary, the pandemic has shown everyone the importance of a vibrant technology ecosystem and has sped up the digitalisation of some of the most traditional sectors of our economy.

"Despite being smaller and less developed than other segments of the private equity industry, venture capital has a great influence on the long-term wellbeing of the entire economy. And, now more than ever, this has proven to be essential."

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