Equity investments in SMEs have been growing steadily over the last years. The main drivers are the accumulation of capital in investor’s hand, new technologies and the low-interest rates.
(Featured Image: Laurent Probst, Partner at PwC Luxembourg and PwC’s Accelerator Network Global Leader / Image Credit: PwC Luxembourg)
To provide a unique and comprehensive picture of the state of investments in SMEs worldwide, PwC’s Growth Accelerator, a global initiative that aims to assist fast growing technology companies go global faster and smarter, has launched its first edition of the “SME Equity Financing Atlas”.
The team of PwC’s Accelerator has considered investments in SMEs covering 52.614 SMEs, 81.141 deals and 33.490 equity investors.
“We analysed all VC and Growth Equity investments in SME’s from 2010-2015 based on Pitchbook and World Bank data. The Atlas is a useful reference guide for CEOs of SMEs looking for financing. It helps them to understand the global equity financing market and to identify barriers and enablers at a global, cross-border and regional level” – Cyrille Foillard, Managing Director at PwC’s Accelerator.
The following trends have been identified:
Boom in equity investment in SMEs – deals up by 108% and capital invested by 122% in five years, resulting in 18,186 deals and nearly EUR 150bn in capital invested in 2015.
Significant increases in pre-money valuation of young companies (especially in later-stage investments) puts pressure on CEOs to deliver on expectations.
Accelerator and incubators on the rise and investing in young companies, as shown by the growth of 578% in number of deals in five years (from 547 to 3,709).
More and more corporates are creating their own venture capital funds to source and invest in young innovative SMEs with more than EUR 20bn capital invested in 2015.
SMEs operating in booming industry verticals such as FinTech, Big Data, Mobile or Cyber Security are increasingly attracting equity investors.
Europe picking up with 21% of deals done with European ventures, but still far behind the USA. More and more cross-border deals show foreign investors’ interest in local ventures.
Of the 1,182 equity-backed companies followed over a period of 10 years, only 5% are able to exit via IPO, with the vast majority being US companies (75%).
“The SME Equity Financing Atlas provides a clear view on the equity financing ecosystem and on current market trends. It offers guidance to governments and policy makers on reviewing existing, and introducing new financing policies by identifying gaps in the ecosystem” – Laurent Probst, Partner at PwC Luxembourg and PwC’s Accelerator Network Global Leader.