European technology exit values and counts have skyrocketed in the past year, reaching $133.4 billion in value, a 400 per cent year-over-year increase, across 1,247 exits.
In 2021, there were approximately 186 public listings, including names such as UiPath, Wise, GitLab, OVH, and SUSE.
In addition, M&As reached an all-time high with 687 European companies being acquired.
The deep pool of technical talent, strong seed fund development, and employees of the first wave of successful tech companies starting new ventures have all contributed to the ecosystem acceleration.
UK and European B2B startups often outperform other regional peers based on capital efficiency, due to a shared mindset of keeping operating costs low and focusing on revenue acceleration early in a company’s growth, according to McKinsey.
For B2B startups, companies from all EU regions demonstrate increased efficiency when compared to SaaS businesses in the United States.
Eastern EU companies boast a 5.6x capital efficiency, Western EU 2.3x, Germany 1.6x, and France 1.4x compared to American companies.
As the next wave of successful European exits gears up, we’ll be looking to key growth-stage benchmarks to identify the cloud leaders of tomorrow.
And much like pioneers such as Skype and TeamViewer before them, we think the best new European cloud companies will approach their go-to-market from a pan-Europe and global perspective.
Unicorns are ‘out’
The so-called Centaur is a business that reaches $100m of annual recurring revenue (ARR) – a rare breed of cloud business, part of an elite subset of the growing unicorn herd.
At $100 million ARR, Centaur businesses have product-market fit, scalable go-to-market strategy, and a growing customer base.
While 520 unicorns were born in 2021, fewer than 60 private cloud businesses reached Centaurs status in that same year, including names such as Pendo, Salesloft, Cloudinary, Iterable, InVision, 6Sense, Yotpo, and Dataiku.
The firm Bessemer identified in a recent report at least 150 private Centaurs, making this category of cloud company 7x more rare than unicorns.
Over the past four years, the firm has seen a steady increase in new Centaur being born each year. In 2019, it identified at least 35 private cloud Centaurs were born and today it projects 70 new businesses will reach Centaur status in 2022.
Whereas new unicorn births have been more volatile, centaur creation has followed a steady uphill climb.
Alex Ferrara, Partner at Bessemer, told City A.M. today that “we believe tracking Centaur growth offers a more accurate pulse on the overall health of the cloud ecosystem. This elite cohort measures what matters—tangible growth in businesses hitting recurring revenue milestones vs. companies reaching valuations based on magical thinking.”
With volatility likely to continue in at least the public markets, many over-hyped unicorns may feel the headwinds and challenges of today’s environment.
But here’s the silver lining: the firm expects the VC and founder community will begin to turn their attention back to SaaS fundamentals where great products drive loyal engaged customers and efficient growth of good old-fashioned revenue.