Upon June’s Brexit decision, TTCP analyzed our UK holdings, comparing the returns and multiples of the country to our other holdings. We shared our findings last month here on the Top Tier blog. As we dug further into the data, we discovered some other interesting geographic trends.
We looked at all realized exits in our database by geography to determine if any non-US regions were outperforming. Despite recent economic uncertainty, China has a high average realized exit value per company at $555M compared to $81M for the rest of Asia, $342M for Europe, and $89M for the Rest of World (including Canada, excluding US).
As the majority of our non-US primary investments are in Europe, we split Europe into three parts: the UK, the Nordic Region (including the Netherlands and Belgium), and the Germanic region (which includes the rest of Europe). Our analysis showed that the Nordic Region was greatly outperforming the rest of Europe and China, with a multiple of 4.78x compared to 2.39x for China, 1.89x for the UK Region, and 1.33x for the Germanic Region. While the large exit and multiple of Finnish gaming giant Supercell (62x) did skew the data, removing it from the data set still produced a multiple for the Nordic region of 3.03x, 50% to 100% larger than that of other regions.
The outperformance of the Nordic region is most notably due to fewer exits with much higher realized values and more multinational acquirers. Through analyzing European exits by region we concluded the average realized exit value per company for the Nordic Region was $1.5B compared to $154M for the Germanic Region and $80M for the UK Region. Additionally, 11 of the 13 Nordic region exits in our portfolio had multinational acquirers, which contrasts to 16 of the 32 UK exits and 10 of the 19 Germanic exits.
While these results and exits may seem surprising, further research argues the Nordic region is the fastest growing startup region in Europe and one of the fastest growing startup regions in the world. According to research compiled by early stage venture firm Creandum, Sweden, Denmark, Norway and Finland account for 2% of the world’s GDP but 7% of global billion dollar exits. The Nordic region made a name for itself after the creation of Skype and Angry Birds (Rovio) in the 2000s, and 2014 saw the region’s record high $13.4B in exited value. The success of 2014 has led to a maturation in the venture ecosystem in the region, with successful entrepreneurs becoming angel investors and more capital flowing into market. While TTCP’s funds are primarily focused in the US, we have and will continue to take a global view when constructing our funds, because innovation and great investment opportunities can be found across the globe.
Our Nordic exposure comes primarily from managers such as Accel Partners and Index Ventures, global firms with a particular focus on Europe. Today we have exposure to many great companies through global or more broadly-focused funds. When we can find a high quality fund with strong performance in a particular region, we will compare that fund with the rest of our opportunity set and invest where we think we have the best risk-adjusted opportunity. For this reason TTCP is continuously conducting due diligence on managers who may have the ability to generate top quartile returns to our funds.
Data in this blog represents companies with realized value above zero from our Mine database, not including companies with value/cost multiples <0.1. Creandum’s Nordic research can be found here.
The data in this blog represents only a small percentage of the portfolio funds and underlying portfolio companies in which the TTCP funds have invested. Additional detail regarding the portfolios of the TTCP Funds and their respective performance is available upon request.