By Amir Mizroch
Europe lacks its very own Facebook, Google or Twitter, but if
the volume of new venture capital backing technology startups on
the continent is any guide, there could be one in the making.
European venture-capital investment last year reached its
highest level since the dot-com boom, on the back of a healthy
market for initial public offerings.
Successful technology startups are bursting out of the tech hubs
of London, Stockholm and Tel Aviv, among other cities. Innovative
young companies from the broader reaches of Europe, the Middle East
and Africa are helping fill up The Wall Street Journal's
billion-dollar startup club. What's still up for debate is whether
Europe's sick economy and its patchwork of regulations can keep
cultivating the freewheeling ecosystem that startups need to
thrive.
Equity financing for European venture-backed companies reached
EUR7.9 billion ($8.9 billion), up from EUR6.3 billion in 2013--the
biggest amount invested since 2001, when companies secured EUR10.6
billion, according to Dow Jones VentureSource. The number of
venture-backed IPOs in the region in 2014 more than tripled to 55,
which raised a total of EUR3.7 billion. In 2013, 18 IPOs raised a
total of EUR500 million.
Overall, industry watchers expect 2015 to be a banner year for
technology M&A and stock flotations in Europe.
Stephen Lowery, a partner at Frog Capital, a U.K.
venture-capital firm, said the tech sector in Europe was still
maturing.
"U.S. venture capitalists have been raising their ninth, 10th
and 11th funds--that is 30, 40 years of experience.
European VCs are raising their third and fourth rounds. It takes
time. There is money in Europe, and the good companies are getting
funded," he told the Journal.
"We're going to see a lot of M&A and strategic acquisitions,
as well as IPO activity in the European tech sector in 2015," said
Adam Kostyál, senior vice president of listing services, Europe, at
NASDAQ OMX Group Inc. Mr. Kostyál said that sectors to look at for
high growth in Europe are e-commerce, financial technology,
streaming content, big data, cybersecurity and advertising-tech
companies.
European companies are attracting capital at an earlier stage,
he said, especially from American VCs. "There are many fantastic
opportunities here in Europe, and U.S. VCs aren't waiting; they're
coming here to access them earlier," Mr. Kostyál said.
But there are challenges ahead, including the maze of 28 sets of
local regulations among members of the European Union. Despite
fitful recoveries from the depths of the European economic crisis,
some European economies are dragging the rest of the region.
The U.S. has introduced some innovative tools to help startups
grow. The JOBS Act lowers the hurdles for companies to list on an
exchange, for instance, allowing smaller companies to file for a
possible listing confidentially, and avoid early scrutiny by
investors. "European regulators have the ambition to do the same
thing as the JOBS Act, but they have to work across so many
jurisdictions. Europe is suffering from this now," Mr. Kostyál
said.
Amid those opportunities and challenges, WSJD has identified 11
companies to watch this year, based on our reporters' research and
reporting. We've avoided many of the bigger or better-known
startups--including those companies that have already listed, been
bought out or are heavily tipped to "exit" imminently.
Instead, we've concentrated on a handful of firms still toiling
in relative obscurity. We've asked industry experts to handicap
their chances of an initial public offering, a buyout or a breakout
year in terms of growth or fundraising.
By its nature, our list isn't scientific. But we think it is a
useful map of the EMEA tech startup landscape for 2015.
This is who we're looking at in 2015.
1. KnCMiner: Founded in 2013 in Stockholm, KnCMiner makes money
from selling bitcoin mining equipment or capacity. The more people
mine bitcoin, the harder it is to generate. That means that people
need ever faster and more powerful machines. KnCMiner's funding
round last September raised $14 million, and the company is getting
out of selling bitcoin mining machines entirely, instead leasing
power to customers. Customers can come to its website and pay a fee
to get a certain amount of computing power for a duration of time.
KnCMiner has built a vast data center, which consumes 30 megawatts
of power, in northern Sweden, in the Arctic Circle. The company is
designing its own new processors and is looking to open more data
centers. While the price of bitcoin continues to slide, investors
are still bullish about KnCMiner, mostly because the company
already has significant traction, bitcoin could rise again and
KnCMiner could diversify its operations to other blockchain
services down the line.
Amir Mizroch
2. SiSense: SiSense, a business intelligence company from Tel
Aviv, secured a $30 million investment in 2014. The company makes
big-data analytics software intended to run on regular computers
with no additional hardware. Some of its customers include Target,
eBay Inc., ESPN, Samsung Electronics and Wix.com. Having grown from
a 30 person operation in 2012 to nearly a 90-strong company with
offices in New-York, it is now looking to expand again and intends
to open new offices in the U.S. and Europe.
Amir Mizroch
3. Kano: Riding on growing interest in coding, London-based
startup Kano Computing Ltd. has shipped thousands of tool kits that
allow users to build a computer and write software easily. While
the company nominally aims at the children's market, it is also
working with educational, corporate and government institutions.
Pearson PLC, the world's largest education company, is using Kano
to deliver a new computing curriculum in the U.K. New directions
for the company could include adding games to the kits, more
advanced coding and even new product classes.
Amir Mizroch
4. Klarna: 2015 is the year that Swedish startup Klarna enters
the U.S. online payments market. It is spending $100 million to
square off against competitors like eBay's PayPal, Amazon.com Inc.
and Stripe Inc. Klarna has been a success in Sweden, where it
handles some 30% of all online payments. In time, it plans to add
about 100 employees in the U.S. The company was valued at $1.4
billion in a funding deal last year with backing from outfits like
Sequoia Capital. Klarna says the $300 million it has raised so far
will be ample to cover its initial U.S. push, but may seek further
funding as it ramps up its U.S. operations.
Orr Hirschauge
5. Truecaller. Stockholm-based startup Truecaller, with its
namesake caller-ID app, has raised around $60 million in funding
and big name backers, including Skype founder Niklas Zennström's
Atomico Ventures. Mr. Zennström has also joined Truecaller as a
special adviser. At the beginning of December the app had more than
100 million users, having tripled its user base in three months.
Growth in India made up a large part of this, with some 45 million
Indian daily users.
Orr Hirschauge
6. Fiverr: Israel-based online services marketplace Fiverr
International last year raised a Series C round of $30 million from
investors to expand into new locations and open sites in languages
other than English. The company is in hypergrowth stage, meaning it
plans on having a big growth year in 2015, including opening a new
office in Chicago. Fiverr is tapping a highly connected,
underemployed workforce. Services start at $5. Prices are higher
based on factors including the complexity of the task, time
delivered and quality. Fiverr takes 20% of every gig purchased.
Amir Mizroch
7. SigFox: Mobile operators are counting on billions of
connected objects--from road signs to your toaster--to justify
their investments in new cellular networks. But French networking
startup SigFox is rolling out a cheap, long-range radio technology
that could upset those plans. Using license-free radio spectrum and
simple radio chips similar to a garage-door opener, the
Toulouse-based company says it can send low-bandwidth signals tens,
if not hundreds, of miles--allowing it to cover countries with
relatively few antennae. Revenue is still small, at EUR6 million
last year. But with clients in sectors spanning shipping, retail
and security, and a foothold in 20 countries, investors are paying
attention: The company is planning to raise EUR100 million in
coming weeks from venture capitalists and strategic investors, says
co-founder and CEO Ludovic Le Moan.
Sam Schechner
8. Nordeus: Nordeus, a gaming-design company from Serbia, has
been the quiet hero on the European gaming scene, ceding the
headlines to major players like King, Supercell and Rovio. But to
many investors, Nordeus is one to watch. It is expanding its games
portfolio into more categories. Its Top Eleven football manager
sports game has been a consistent top 10 in the app stores and,
while free to play, makes money through in-app purchases [the
company doesn't disclose revenue]. The company itself is expanding,
with offices in Serbia, Dublin and San Francisco. It is opening a
games-development office in London soon. Most important, it is
shifting to a mobile-first, cross-platform strategy to take on the
giants like King and Supercell. Players are also incentivized to
watch in-app video ads.
Amir Mizroch
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9. Oxbotica: Spun out of Oxford University's Mobile Robotics
Group only three months ago, British startup Oxbotica may be one of
the few companies in the world to rival Google in driverless cars.
The company is working on robotics and autonomous systems,
flexible-display technology with applications in "smart" glasses,
synthetic retinas and foldable screens. Dr. Graeme Smith, Oxbotica
CEO, says his company builds 3-D maps of cities with sensors and
cameras through which autonomous systems can navigate their
environment. Oxbotica is sitting on some 40 different intellectual
property patents from Oxford University to which it has exclusive
world-wide license, and it is trying to commercialize those
patents. The company is currently talking to car manufacturers,
surveying firms, logistics firms, warehouse companies, civil
engineering and building firms, and even games companies.
Amir Mizroch
10. Withings: Withings was among the first companies to connect
personal health to the Internet, with its Wi-Fi-enabled bathroom
scale six years ago. Since then, the boutique French tech firm has
expanded its lineup of connected devices to include blood-pressure
monitors, sleep-quality sensors, fitness trackers and a
well-reviewed pair of smartwatches. But the pressure will be on
this year as connected health moves from being a Silicon Valley
buzzword to a battleground for the likes of Apple Inc., Google and
Samsung Electronics Co. Withings doesn't disclose revenue figures,
but says it has doubled its staff in the past year to 160, after
raising EUR23.5 million in 2013. Next up, according to co-founder
and CEO Cédric Hutchings: raising "significant funds to fully take
advantage of this opportunity."
Sam Schechner
11. Wooga: Wooga has accomplished what few game developers have:
serial success. While King Digital Entertainment and Rovio have
created megahits such as "Candy Crush Saga" and "Angry Birds,"
repeating that success has proved elusive. But for the Berlin-based
company founded in 2009, there is a method to Wooga's roster of
hits--five in total, including "Diamond Dash," "Pearl's Peril," and
"Jelly Splash"--according to CEO Jens Begemann. The company relies
on a "hit filter" and decentralized teams of developers to find
what works and what doesn't. Wooga's games are free to play and
designed for smartphones and social media like Facebook, with
profits being driven by in-app purchases. The company said revenue
rose by 30%, and earnings before interest and taxes had quadrupled
in 2014.
Chase Gummer
12. Lumus: Based in Rehovot, some 12 miles south of Tel Aviv,
this company's unassuming offices belie an advanced technology
behind many of the wearable display prototypes on the market. The
company's see-through head-mounted displays are a step ahead of the
competition in resolution and sharpness. Hailing from Israel's
defense industries, where similar technologies were used to create
visor displays for fighter pilots, the company has an experienced
engineering team. Some smart goggles with Lumus displays are
intended to hit the enterprise market this year, and some consumer
models made by top-tier consumer electronics companies are expected
to be announced.
Orr Hirschauge
Write to Amir Mizroch at amir.mizroch@wsj.com
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