PwC’s SME Equity Financing Atlas: There is an Investment Boom in SMEs

PwC’s Accelerator has published the first edition of their SME Equity Financing Atlas.  According to their data, 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 low-interest rates. PwC described a “Boom in equity investment in SMEs.”  The report (embedded below) is fascinating in depicting the trend, even as investments in have slowed in recent quarters, due in part to geopolitical questions. The biggest shortcoming of the document is that it largely does not include 2016 in the numbers.

PwC’s Accelerator, a global initiative that aims to assist fast growing technology companies go global faster and smarter. 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,” explained Cyrille Foillard, Managing Director at PwC’s Accelerator.

The PwC Accelerator has identified the following trends:

  • There is a 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 €150 billion in capital invested in 2015.
  • Deals Per Capita in 2015: USA #1, Israel #2, Estonia #3
  • Significant increases in pre-money valuation of young companies (especially in later-stage investments) puts pressure on CEOs to deliver on expectations.
  • Series A rounds take biggest equity stake, ticket sizes in all rounds have increased.
  • 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 corporates are creating their own VC funds to source and invest in young innovative SMEs with more than €20 billion 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 is 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%).

Laurent Probst, Partner at PwC Luxembourg and PwC’s Accelerator Network Global Leader, said the report provided a clear view on the equity financing ecosystem.

“It offers guidance to governments and policy makers on reviewing existing, and introducing new financing policies by identifying gaps in the ecosystem,” said Probst.

 


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