How will European Venture Capital change in 2020?
Sompo Expands into Europe with an investment in Isomer Capital
Japanese Sompo Holdings invested in the second fund established by Isomer Capital, an investment fund that connects investors outside Europe with European startups, as Europe increases its share of the global unicorn creation.
As Europe embarks on positioning the continent as a high-tech hub as significant as its US and Israel equivalents, more venture capital is flowing in Europe’s direction. The sizeable potential of the European technology industry attracts increasing venture capital investors. Sompo Holdings(“Sompo”), Japan’s one of largest insurance giants, which runs innovation centers in Israel and Silicon Valley, is one.
With annual revenues of $36 billion and presence in over 30 countries, Japan’s one of largest insurance companies Sompo announced it is investing in the second fund of Isomer Capital. This investment fund targets European venture capital funds and tech companies directly. The investment adds to direct investments Sompo makes in startups across Europe.
Back in 2015, Isomer Capital’s team understood the potential of the European VC industry. That year, Isomer launched its first fund which Sompo supported as one of the investors. In July 2020, Isomer Capital followed with a second fund. Isomer Capital is unique in offering investors broad access to Europe’s diverse VC industry, including the most promising technology companies that emerge on the continent, of which there are quite a few. In addition to the capital invested in these companies, Isomer Capital helps Sompo’s innovation center in Israel which promotes scouting for startup companies in Europe.
Europe represents the largest global economy with 44 countries, a very high rate of academics (81% in the 25-54 YO population), and 6.1 million software developers out of 26.9 million worldwide.
Crunchbase data shows that in the first half of 2021, European startups raised a record amount of $59 billion, three times more than in the same period last year.
Corporate VC funds of the world’s mega-corporations have been increasing their strategic investments in Europe, doubling them from $2 to $4 billion over the past five years. With Europe generating many more high-growth companies than before, 115 of them achieved a unicorn status as of 2020. In comparison, Europe had only 31 VC backed unicorns at the end of 2015 and three at the end of 2010. The success shows in the returns achieved by European VC funds, boasting higher returns than those of their US counterparts.
Nevertheless, investors outside Europe, such as Japanese Sompo, find it hard to access new technologies developed in Europe despite the encouraging figures. This is due to early startups’ tendency to stick with the local market rather than expand globally. This tendency leaves the VC industry around these startups closed for non-European VC investors.
Isomer has always sought to bridge the gap between non-European mega-corporations and European startups, making them accessible to one another. Isomer’s first fund raised over € 100 million and made 34 investments (a mix of VC funds and direct co-investments in the startups). These investments generated nine unicorns, of which four were sold while five are still growing. Isomer’s second fund, launched in July 2020, raising € 250 million, having made 20 investments so far that have already generated three unicorns
From a geographical perspective, Japan ranks second among Isomer’s investors, with Sompo’s investment contributing to this stance.
Yinnon Dolev, Head of Sompo Digital Lab Israel and Europe, said, “Isomer Capital is a leading VC to focus widely on European Venture Capital. The investment firm is a great player in the European startup arena, and I believe that our partnership will offer Sompo a clear path to Europe’s innovation ecosystem and best opportunities.”
Chris Wade, Partner and Co-Founder, Isomer Capital, said, “Sompo is looking to partner with cutting-edge European startups in order to launch joint services that can help also the startups to scale. In addition to locating insure-tech ventures to enhance insurance operations, following our partnership we understand that Sompo is looking for new verticals in mobility, digital health and Eldercare, wellness, cyber security, Industry 4.0, smart cities, AgriTech, resilience tech, and more, and this joint journey can be part of the answer for Sompo’s goals in the European market”.