Eurazeo : White Paper 2021

2021	EURAZEO DIGITAL WHITE PAPER

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EURAZEO DIGITAL WHITE PAPER

2021

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2021	EURAZEO DIGITAL WHITE PAPER

Statements contained in this White Paper are based on the current expectations, estimates, projections, opinions, and beliefs of Eurazeo as of November 2021. Such statements involve known and unknown risks and uncertainties, and undue reliance should not be placed thereon. There can be no assurance that historical trends will continue, due to factors including but not limited to the ongoing impact of COVID-19, and prospective investors should not base investment decisions on the assumption that trends will continue. Please see disclaimer at the end of this White Paper for additional considerations.

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EURAZEO DIGITAL WHITE PAPER

2021

EXECUTIVE SUMMARY

EXECUTIVE

2021 is already a strong year breaking records across the European venture ecosystem. As key responders to the COVID-19 pandemic-relatedbusiness and consumer challenges, digital and tech companies are experiencing an extended period of accelerating growth. With now close to 300 European unicorns and record inflows to European venture capital funds, Europe has emerged as a powerful force shaping the global venture capital landscape. 2019 had been a bumper year, closing out with over $16 billion raised and $36 billion invested. 2020 surpassed expectations; despite an initial slowdown early in Q2, rapid growth in the following months compensated for this. 2021 is set to continue this strong trend. The whirlwind of growth has attracted significant attention both from non-Europeaninvestors and non-Europeancapital.

We believe this rapid growth is underpinned by three strong fundamental drivers:

1. New norms born from the pandemic,
2. Digital's critical role in driving sustainability, and
3. Keen interest from corporate incumbents

Digital companies, and tech in general have been a powerful force, swiftly addressing pandemic-related challenges where governments and corporates struggled. Regulation and the geopolitics of data have added momentum to a trend towards the prioritisation of digital safety and transparency. The global pandemic, a high incidence of significant climate events, women's empowerment, and civil unrest have highlighted social and environmental inequalities in 2020, crystalising attention on climate change, diversity and social inclusion. European corporate incumbents have a heightened appetite for innovation and agility as they seek to maintain relevance in a rapidly shifting world.

The venture capital market in Europe has entered a new paradigm with trends pointing towards a buoyant new normal. Accelerating fundamental growth is contributing to an increase in valuations, reflecting additional potential growth from vast addressable markets, with start-upsgaining market share in many sectors. Larger funding rounds, greater volumes of transactions, and faster, bigger exits reflect the fact that investors and founding teams are becoming more sophisticated and experienced. European venture funds stand out for their returns, as experienced teams with sophisticated backers are building companies with stronger fundamentals.

Note: Unicorns are defined as companies valued at over $1 billion at any point over the period during which the investment was held.

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2021	EURAZEO DIGITAL WHITE PAPER

SUMMARY

European venture is positively differentiated from its US counterpart. This

intensifies the need for local knowledge, experience, and cultural understanding. European venture funds display attractive performance, growing in both real and relative terms on the global venture landscape. As a collection of countries with different languages, cultures, regulations and governments, Europe has particularly supportive governments, an abundance of talent, and privileged access to academia. Europe is fragmented with multiple hubs at different stages of development, and whilst challenging to navigate, this can create a myriad of opportunities for those able to access and execute them.

Understanding the complexities of the multi-faceted "flywheel effect" in Europe is critical to investing in the ecosystem. Talent and capital spins out from successful businesses only to feed back in, reinforce and build momentum in the wheel. Success stories create a positive feedback loop, with entrepreneurs becoming serial entrepreneurs and other stakeholders becoming more sophisticated. Whilst the ecosystem has become more mature with fundamentally better businesses, access to origination requires an ever deeper, pan-Europeannetwork and knowledge base. The funding environment is flush with not only local and international venture capital funding, but an increasing pool of angel and corporate backed resources. The exit environment has become more varied, with demand from public and private markets as well as strategic corporates, and an increasing understanding of digital stories and dynamics.

We believe the European digital venture space is ripe with investment opportunities. Of particular interest are the innovations stemming from an evolving working environment, accelerated by the pandemic: enterprises are being consumerised as individuals are being enterprised. Healthcare is being transformed by technology, with digital healthcare improving efficiencies throughout the treatment journey. Fintech has a myriad of opportunities with both developed and emerging countries moving towards cashless economies.

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