Graduation Rates for Accelerated Startups

Relative odds of making it through funding rounds for European accelerator alumni.

I recently wrote about Accelerators as Series A Engines, and got a number of follow-up questions from that post. In particular, a number of people showed interest in whether going through an accelerator increases the odds of ‘making it’.

One possible attempt to address that question is to look at round by round graduation rates for cohorts of accelerated and non-accelerated startups separately. Yoram Wijngaarde and the team at Dealroom came to the rescue providing the data, as this is a topic they have covered in the past, comparing Europe with the US over time.

Europe only as of March 2017. Source: 

What the bar chart above shows is the percentage of European seed-funded companies that progress through to subsequent rounds of funding (capped at Series D), for both cohorts of accelerated and non-accelerated startups.

A few observations worth making:

  • As a caveat, these percentages are likely to be slightly inflated compared to reality since a non-insignificant number of seed rounds do not get publicly disclosed relative to larger more late stage rounds that are more likely to be announced. However, it is still relevant to look at them on a relative basis;
  • At first glance, it’s apparent that a larger number of accelerated startups make it through to Series A and Series B compared to non-accelerated. Cumulatively, c. 40% more startups manage to raise a Series A round (37% vs 27%) and almost 2x as many go on to raise a Series B round (27% vs 14%);
  • In particular, 71% of accelerated startups that have raised a Series A, go on to raise a Series B (vs. ‘only’ 53% for non-accelerated), which is comparable to, if not higher than, the A-to-B graduation rate of the very top tier US VC portfolio companies:
  • However, post Series B the two cohorts seem to re-calibrate. It’s hard though to attribute statistical significance to the deltas in percentages given the much smaller sample sizes at those stages; the drop-off from B to C for accelerated startups looks particularly pronounced, with 67% of Series B funded companies not proceeding to raise a Series C round;
  • Overall across the two cohorts, 4–7% end up going all the way to Series D and (if you believed in the statistical significance of numbers at this stages) 58% more accelerated startups end up raising a Series D round (7.0% vs 4.4%);
  • What these numbers do not tell us though is what happens to startups that do not progress to the next funding round. In fact there are four possible outcomes for a company after each funding round and the numbers in the chart only represent one of them (the 1st):
  1. Raises a further round of funding;
  2. Does not raise / has not yet raised a further round of funding (i.e. becomes self-sufficient or has yet to go to market)
  3. Fails;
  4. Gets acquired.
  • Without actual data on each of these four possible outcomes at each funding round, one can only speculate on the causes of leakage. So one could, for example, speculate that accelerated startups get to cash-flow profitability faster than non-accelerated ones and therefore do not need to continue raising dilutive capital post Series B; or that accelerated startups become attractive M&A targets much earlier in their life than their counterparts; or quite simply that there isn’t enough data on accelerated startups post Series B because the cohort is just too young and most have not gone to market yet (thanks Jon Bradford for pointing that out!);
  • A more skeptical one could speculate that accelerated startup live off ‘demo-day hype’ and momentum up until Series B and then gravity brings them back down to earth after that, either failing or transforming into “cockroaches” (Matt H. Lerner’s favourite nomenclature for startups that keep chugging along between life and death); or that accelerated startups tend to turn into great acqu-hires, failing to generate the type of exits VCs strive for.

I am hoping to get more data on these potential outcomes, so hold tight for a follow-up post!

2016: The Year European Venture Capital Changed Gear

68 tech VC funds raised €8.4B in a record year for Europe.

Despite the unprecedented macro and political uncertainty that has characterised 2016, this has undoubtedly been a very prolific year for European tech VC funding.

I compiled a list of new tech-focused funds publicly announced this year and, with a couple of weeks to go, the headlines are hot: close to €8.4B of capital was raised by 68 European funds, at an average fund size of €127m (I’ve ignored clean/bio/med-tech funds for simplicity).


Note: numbers in this table exclude two funds that were announced, but whose size was not disclosed.



Amount raised and number of venture funds announced in European tech (by quarter)

A few take-outs from the data:

1. Growth! Since I’ve only been tracking new funds this year, I haven’t got a direct comparable for 2015. Luckily Atomico came to the rescue with their freshly released State of European Tech 2016 report, with data on new tech funds provided by Invest Europe (EVCA) up to 2015. After applying some adjustments to my data to make it as like-for-like as possible (e.g. they exclude Russia and Israel, they do not include all “growth” funds nor all corporate venture funds), in the most conservative scenario where I completely ignore corporate venture funds and growth funds, it looks like 2016 will be up at least 33% in terms of capital raised (well on pace with last year’s growth) and 10% in number of funds (reverting a trend that saw number of funds closed drop by 20% in ‘15), making ‘16 a record year as far as recent memory is concerned. And that is by excluding some funds that undoubtedly do ‘venture’ such as Idinvest Growth (backers of Onfido, Happn, Zenly), Nokia Growth (Clue, Drivy) and Santander InnoVentures (PayKey, Elliptic) which Invest Europe might actually have included. So the actual growth could be much higher.

Within the year, H2 appears markedly down compared to H1. One could infer that the Brexit referendum and US election had an impact on fundraising activity in the second part of the year. In reality Q1 & Q2 appear to be two exceptional quarters with the mega funds (>€250m) like Index Ventures, Nokia Growth Partners, Rocket, Accel London, EQT Ventures and Partech Ventures Growth together raising €2.6b in capital in the first half of the year. Excluding mega funds, H2 was only about 17% down in value compared to H1, and interestingly was up 46% in the sub-€100m category.

Fresh new funds raised by VCs is typically a strong leading indicator of the direction of the industry, as funds have to deploy capital within a specified period of time (3–4 years for first cheques). So, in a year in that will see capital invested at levels roughly on par with 2015, this is a great sign of things to come for European startups.

2. More late stage capital. Capital was raised at all levels and for all venture stages, not just at the small early end as it’s often conventional wisdom with European VC. The mega funds in particular raised €3.5b combined. These are the funds that can write €20m+ cheques at Series B-C-D and support companies until larger exit, a segment of the market in which Europe has historically lagged the US.

It’s great to see more capital becoming available at that level, to help European champions scale, with the welcome appearance of EQT Ventures as a 1st time fund in that category (and the largest raised in ’16 at €566m).

3. New breed of GPs. While the mega funds continue to raise larger funds, a new generation of 1st time funds is clearly emerging. 44% of the new funds announced were 1st time funds (30), representing 30% of the capital (€2.5b), with the average first time fund being €65m (excluding EQT Ventures mega fund, which would skew the numbers). This is a very important category as 1st time funds tend to come to market with innovative strategies and models (e.g. Entrepreneur First) , often tailored to their local market (e.g. Kibo, Daphni) or to the previous experiences of the GPs (e.g. BlueYard, EQT Ventures), new ideas and perspectives, filling gaps overlooked by established funds. Shai Goldman’s spreadsheet on sub-$200m US funds reports ‘only’ 25 1st time funds raised in the US this year. In that size category Europe has 27 already and, if one assumes that most if not all 1st time funds are in the sub-$200m category (maybe an incorrect assumption for the US), then Europe is likely to have produced more 1st time funds than the US this year, which would be remarkable.

I’ve written at length about 1st time funds and what they entail here, it’s great to finally see LPs embracing this category in Europe too. It’s also great to see successful entrepreneurs, executives and investors recycling their wealth and experience back into the ecosystem.

4. More specialisation. More funds are being raised to go after a specific opportunity or strategy: from Seraphim and OHB space-tech funds, to Entrepreneur First follow-on fund for deep-tech startups, to Anterra’s agri-tech fund, to Partech Growth fund, to Kibo and K Fund Spain-focused funds, to Barcamper in Italy, Daphni in France and Karma in Estonia. Stage, sector and country specialists are emerging, led by specialist managers with relevant experience.

This is fantastic news for European founders who can finally find the best-fit capital for their business or sector, while increasing their chances of success with the right support.

5. Democratisation. It’s clearly not just about the UK and Germany anymore. While this math is bit simplistic, as most funds can also invest outside of their home country, non-UK and non-German HQ’d funds accounted for c. 60% of all capital raised, with Sweden and France crossing the billion euro mark, Netherland, Finland and Israel each solidly in the €400–500m range and Southern-European countries like Italy, Spain and Portugal emerging with €200–250m in capital raised in each. Even Estonia and Bulgaria are coming up with their local VC funds.

This was the main theme that emerged from Atomico’s recent report published at Slush ‘16: capital is following companies from an increasingly diverse range of geographies and hubs across Europe. Great news for founders outside of the traditional tech hotbeds.

6. Government support. To the best of my knowledge, at least 26 out of 68 funds (38% by number and 45% by value) announced in 2016 had a national or European governmental institution as a LP, with the European Investment Fund (EIF) alone present in 20 funds (I believe in line with 2015). The recent announcements of a €1.6B pan-European EU-sponsored fund-of-fund programme and of a £400m top-up to the British Business Bank suggest there is more of that to come in the near future. This continues to be the reality of the fragmented European venture capital market. The bet remains that over time, as the industry continues to grow and mature, generating large and larger exits, attractive returns will eventually flow and attract private institutional capital from the likes of pension funds and insurance companies to the asset class.

This is already starting to happen at an accelerating pace, which is a great sign, with the recent news of Legal & General committing to Accelerated Digital Ventures, AP4 (Swedish national pension fund) investing in EQT Ventures, and Italian insurance group Generali in Earlybird Venture Capital most recent fund. It’s also worth noting that, out of my list, 40 funds raising a total of €4.6B do not have any government agency as LP, including 20 1st time funds, showing signs of European funds being able to stand on their own two feet.

Now onto more and bigger exits, please! If every fund manager is targeting to return 3x to their LPs, this vintage will need to return >€25b. That’s easily somewhere in the €100–200b worth of exits from the portfolio companies of these 68 funds over the next 5–10 years. While it certainly feels like a big endeavour, considering the pace of exits is now in the order of magnitude of €10b/year, the European tech industry has never been stronger and better positioned.

Onto an even greater 2017!

The Investment Thesis Behind Appear Here

As I think it is a good practice for investors to make investment thesis publicly available, this post will be about the investment thesis that led Forward Investment Partners to invest in Appear Here back in November 2012.

As a backgrounder on the company, Appear Here aims to be THE online marketplace where commercial property is rented out, irrespective of lease length. The investment thesis can be summarised as backing a compelling entrepreneur to disrupt a large, ripe market via a proven and attractive business model.


Commercial property is a large sector (between retail and office rentals, the UK market is worth well in excess of £30B a year), currently undergoing rapid and significant structural changes:

1) Landlords are under pressure as an ever larger portion of their portfolio becomes vacant and occupied lease lengths keep falling year after year.

  • Vacancy rates up. This is driven by the weak economy, and online sales growing as a portion of total retail sales. This has meant UK retail vacancy rate (i.e. readily available retail units as a % of total available retail units) has surpassed 16% towards the end of 2012. This is likely to grow even further, possibly double, driven by ongoing growth of e-commerce and the large number of long-term leases coming up for renewal in the next 2-3 years which are unlikely to be renewed. It is also worth noting that vacancies have a double-whammy impact on landlords: not only do they generate no rental income (opportunity cost), they still incur in business rates which the landlords have to front (actual cost). This cost UK landlords £1.1B in 2011/12;

commercial property vacancy rate

  • Lease lengths down: the average length of new signed leases continues to shorten, from over 20 years in 1991 to c. 9 years in 1999 to below 5 years now, with terms now often including long rent-free periods and short break clauses. There is no sign of this trend inverting any time soon;

commercial lease length

  • Conclusion: landlords know they need to adapt to a new environment where their inventory gets rented out on extremely flexible and standardized terms (e.g. rolling weekly/monthly leases). What they are looking for is a platform that will help them to optimize this inventory so the total net value of the yield is the same.

2) Secondly, on the demand side, brands are increasingly trying to build direct relationships with their customers, cutting the intermediaries out of the equation as Paul Fisher has elegantly illustrated in one of his recent blog post.

  • In the long-term the dis-intermediation of the retail world is inevitable and brands will establish more direct relationships with their customers;
  • Retailers, particularly online ones, are starting to value bricks & mortar as an extension of their brand: much more about the touchy-feely customer experience rather than product revenue. What companies like Rapha, Warby Parker, Moo, Etsy etc. have done offline are good examples;
  • As online cost of customer acquisition keeps increasing month on month and return from online marketing dollars is maxed out, offline becomes an attractive complement as another touch point in the customer purchase cycle. This requires a shift to viewing a square foot of space as media rather than as potential revenue generator;
  • Conclusion: brands need flexible and easily accessible physical retail.

3) Last, dis-intermediation in the property marketplace is inevitable: timing is not clear, but the web WILL disrupt as it has done already in other sectors:

  • the transparency brought by the internet makes it increasingly difficult for middle-men to justify their share of the value created along the entire value chain, leaving buyers and sellers to retain the margin that would otherwise go to the market intermediaries;
  • the compensation model under which commercial property agents are remunerated is still the same as it was when lease length averaged > 10 years, with short-term leases not generating enough commission to be worth their while;
  • Conclusion: the web will enable dis-intermediation in the commercial property market.

Business Model

An online transactional marketplace is a proven business model that is very attractive because of its economics and its defensibility, at scale.

  • Attractive economics: marketplaces generates a fee without taking the cost of inventory and incurring in the risk of not being able to shift it; in the case of Appear Here, the inventory is owned and held by the landlords, and Appear Here valuably facilitates the transaction via its website;
  • Defensibility: marketplaces also tend to be highly defensible, once they reach a certain level of liquidity; this is because buyers/sellers tend to naturally gravitate (and stick) to highly liquid marketplaces where they have the highest chance of being able to find a large number of seller/buyers.


Ross Bailey is a charismatic and energetic entrepreneur with a grand vision and the courage to go after it. We, at Forward Investment Partners, love backing entrepreneurs like Ross.