Eurazeo
Published in

Eurazeo

Idinvest — European Consumer Startups Map 2020

Consumer behaviours are changing fast. You can now find and buy almost anything you could ever need on your smartphone while commuting: food, gaming, education, housing, banking, entertainment, clothing… — from buying a €1k mattress online to booking an online appointment with a GP.

B2C startups are taking advantage of the web as the ultimate and universal distribution channel and are leveraging mobile to reach as many customers as possible. Brands are also going global and are easily able to attract more users in Japan or in the US even with an app originally developed in a Swedish garage!

The Old Continent has enjoyed successful VC-backed consumer startup exits and there are still massive opportunities ahead. More than half of the largest recent European companies’ tech exits are consumer startups (Spotify, Supercell, King, Farfetch, Zalando, Delivery Hero, Just Eat, Skyscanner…) and there are many more promising scale ups following this path (Revolut, Deliveroo, Glovo, Auto1, Backmarket, Wefox…).

Venture Capital investment in European consumer startups has risen at a whopping annual rate of 30% from €4.4bn in 2014 to €16.6bn in 2019, while the overall investment in consumer startups globally grew at 19.5% annually.

European startups are attracting a larger share of VC money: in 2019, 16% of all VC investments in the consumer sector went to European startups, compared with 11% 5 years ago. We believe that Europe is uniquely positioned to build global leaders in certain consumer categories (finance, healthcare, food, travel, gaming, sustainability, privacy, sharing economy etc.).

6 months ago, we decided to launch a study in order to release Idinvest’s European Consumer Startup Map which features 180+ of the most promising consumer startups in Europe.

We have analysed and surveyed 1,500+ companies across Europe to finally release this list. We have limited the list to companies generating a revenue of more than €1 million in most cases and which have raised less than €100 million. Companies above this fundraising threshold, which have a high growth rate (or which have already exited) are considered “Giants” of each category.

Among thousands of consumer facing apps, we have picked a list of the top performing companies, covering a wide range of categories, from stock trading to personal journaling and gaming. This is not a scientific study but more a feel of the pulse of the market. If you think we are missing some companies and/or categories, please feel free to share your thoughts.

A quick disclaimer: Idinvest-Eurazeo’s portfolio companies are over-represented in this mapping. It’s all part of the game when it comes to projects like this. We designed the mapping to add these companies to our initial list of rising stars, instead of putting them at the expense of other companies. We also included all our consumer companies without trying to discriminate.

Finance

In the past 5 years, venture capital investment within the finance sector in Europe has risen from €663m in 2014 to €4.7bn in 2019 (+48% CAGR vs. +29% CAGR for worldwide fintech investments). It’s the largest VC-backed consumer segment in Europe and 26% of all VC investments in fintech were made in Europe (vs. 16% on average for all categories).

Fintech has started to go mainstream and the number of sub-verticals has grown quickly, driven by the open-banking revolution and API-connectors like Plaid, Tink and Truelayer.

Neobanks (Revolut, N26 and Monzo), as well as PFM (personal finance management) startups (Lydia, Cleo, Bankin’, Finanzguru) are positioning their apps as one-stop shops for all your finance needs: paying for your daily expenses, buying stocks or crypto, signing up for insurance and so on. These players are aiming at maintaining a daily relationship with users with the long term vision of replacing traditional banks. They are becoming the swiss army knife of finance tools.

Some other players are going after a single vertical and are developing an outstanding consumer experience with a more compelling value proposition and lower pricing. Some of the trends that caught our attention include:

  • Trading applications (TradeRepublic, Freetrade and Bux in Europe, Robinhood in the US) are democratising stocks and indexes trading, especially for millenials.
  • New loan and mortgage solutions are emerging and bringing financial independence to lower & medium classes with digital and low cost installment payment solutions (Klarna or Alma) or consumer loan companies (Credit Kudos).
  • Legacy players are being disrupted by fast growing startups such as Swile (digital solution to replace paper meal vouchers) or Taxfix (allowing people to file tax much more easily).
  • Fintech products are dedicated to very targeted audiences: teenagers (Kard, Pixpay), gig workers (Portify, Wollit, Steady Pay)…
  • GAFA and software companies are becoming fintech. As B2C fintech is becoming saturated and acquisition costs are increasing, we expect to see even more tech companies offering financial services to their customers or employees (Uber has already launched Uber Money, Amazon is likely to follow, as well as Facebook and Libra).

Mobility

In the past 5 years, venture capital investment within the mobility sector in Europe has risen from €352m in 2014 to €2.5bn in 2019 (+48% CAGR vs. +29% CAGR for worldwide mobility investments). It’s the second largest VC-backed consumer segment in Europe and 11% of all VC investments in mobility were made in Europe (vs. 16% on average for all categories).

  • Micro-mobility is still in its early days in Europe. The first wave came with Chinese free-floating shared bikes (2016–2017). The second wave involved e-scooters (2018–2019) dominated by American companies Lime and Bird. Most recently, e-scooters have flooded all major cities, with European players leading the way (Circ (acquired by Bird), Voi, Tier and Dott). The next micro-mobility wave (2020–2021) relates to e-bikes. This time around, European players are leading the way with startups such as Cowboy, Vanmoof and Angell focusing on the premium urban segment and Cityscoot for e-mopeds.
  • Ridehailing is already 10 years old, and is still by far the largest market in value, with Uber, Cabify, Freenow, Bolt and Heetch leading the way. We have learned that this is not a winner-takes-all kind of model, and that now is the time for the market to mature and limit promo-codes. Some consolidation may happen. The future of ride hailing will be to expand from ultra-urban city centers to less dense areas. This could occur through further deregulation (finger crossed), and if not, via robo-taxis.
  • The car industry is not dead, but it’s no longer common to buy a brand new car at a dealership when you turn 30. Auto1, Cazoo, Aramis and Brumbrum have partially digitalised the buying process without really transforming it. The way is clear for Drover, Cluno and others to invent the real leasing 2.0: flexible car subscriptions of second hand vehicles. And those that only need a car to escape the city for a weekend, can still count on Blablacar, Drivy and Virtuo.
  • We are still waiting for successful MaaS aggregators. Journey planners such as Citymapper, Waze, Google Maps and Moovit (acquired by Intel) have not managed to become the one-stop shop app for mobility. This may come from a prosumer approach if some of the young newcomers are able to build the Swile (ex-Lunchr) equivalent for mobility.

Healthcare

In the past 5 years, venture capital investment within the healthcare category in Europe has risen from €658m in 2014 to €2.0bn in 2019 (+25% CAGR vs. +13% CAGR for worldwide healthcare investments). It’s the third largest VC-backed consumer segment in Europe and 19% of all VC investments in healthcare were made in Europe (vs. 16% on average for all categories).

  • What is the consumer market in healthcare? As most healthcare products are not paid for or chosen directly by consumers in Europe, one could be tempted to reduce the European healthcare industry to wellness, a niche within the healthcare sector. But in reality, the consumerization of healthcare is a trend that goes beyond business models, and startups are building products and experiences that are increasingly tailored for the end user; patient or consumer, depending on the context.
  • Companies can sell directly to individuals, but targeting users can be challenging in this sector (how is it possible to determine when someone is sick and in need of a certain product?) and acquisition costs are often too high. Consequently, many choose a B2B2C model, through companies or health insurers. This third party has a key role in ensuring the quality and clinical proof for the final user.
  • A new trend in Europe is the reimbursement of telemedicine and digital therapies by public insurers. This is now the case in Germany and has started in France and in the UK. This paradigm shift will have long lasting effects on the landscape for digital health companies in Europe.
  • Consumer healthcare companies choose either generalist or verticalized approaches:

Generalists offer convenient platforms or aggregators of products (online pharmacies) and services (teleconsultation companies). They provide solutions for everyone and tend to integrate more and more vertically into the user/patient journey, as TeleClinic is doing in Germany, by matching teleconsultation with pharmacies and labs, to drive retention.

Verticalized startups target therapies or a specific population. They tend to start with more organic users solving a specific problem before diversifying their offer. D2C men’s health companies like Charles in France choose to expand their initial offer to drive more usage and retention. Digital therapy startups tend to leverage their experience in product and clinical studies to create more therapies in their therapeutic area.

  • Among these startups, many look (or will look) to the US for a bigger or more consumer-like market, as Kaia Health is doing. However, regulation is not always a downside and a lot of companies in this list turn the inherent complexity of their home markets into barriers to prevent entry from competition. This will drive a trend of dominant national players, like Doctolib in France.

Food

In the past 5 years, venture capital investment within the food sector in Europe has risen from €769m in 2014 to €1.9bn in 2019 (+19.8% CAGR vs. +30.9% CAGR for worldwide food investments). 19.8% of all VC investments in food were made in Europe (vs. 16.1% on average for all categories).

  • The first wave of European food tech was focused on building the food delivery infrastructure (Delivery Hero, Deliveroo, Glovo, Takeaway) and created liquidity for restaurants.
  • In the Middle-Age, posting houses became inns to feed and offer rest to travellers. In the 20th century, McDonald’s restaurants grew exponentially around the US road infrastructure. In the past 18–24 months, we have seen the rise of dark kitchens (Keatz, Taster) and dark groceries (Glovo) which are both piggybacking this new food delivery infrastructure and adding a real estate layer to it. Dark kitchens and groceries are selling products exclusively through delivery. The customer facing location of a restaurant or a grocery shop is replaced by a cheaper real estate location optimised for order preparations.
  • Europe is no stranger to the rise of alternative meat startups and we think this trend will grow. We don’t have any equivalent to Impossible Foods or Beyond Meat yet but very strong founding teams are both building meat substitute products that are either plant based such as This.co and 77Foods, or cell-based like Meatable and Mosa Meat.
  • Another trend relates to a rise in the number of startups working on reducing food waste (TooGoodToGo, Karma, Phenix).

Travel

In the past 5 years, venture capital investment within the travel category in Europe has risen from €383m in 2014 to €1.6bn in 2019 (+33% CAGR vs. +29% CAGR for worldwide travel investments). 20% of all VC investments in travel were made in Europe (vs. 16% on average for all categories).

  • Travel is one of the few sectors with a market size bigger in Europe than in North America (39% of global tourist spend in 2018 is in Europe, vs. 24% in the Americas, source Statista). Hence Europe acts as a great lab for travel startups to innovate in and many travel tech giants have emerged in Europe, including the likes of booking.com, Secret Escapes and Skyscanner.
  • Opportunities are ripe for European travel startups to continue to innovate. Here is a selection of the recent trends we’ve seen in this industry:

➡ The travel sector has historically been largely underserved by technology and multiple players are helping upgrade the industry’s tech stack. Some players are helping bring about much more agility in the industry by introducing the latest generation of property management software (Mews, Apaleo) or by simplifying how distribution works (Duffel, Impala). We’ve also seen a wave of startups focusing on operations management (key handling, cleaning, reservation management, pricing) for home rentals (e.g. Guestready). These enablers have resulted in the emergence of a new generation of travel startups and this trend is likely to accelerate.

➡ We’ve seen multiple startups leverage technology to develop furnished apartment rental businesses, either as operators (Limehome) or marketplaces (Homelike)

➡ The scope of the accommodation sector has become so wide that two types of players have emerged: (i) meta search engines (Holidu, Hometogo), which help consumers navigate through multiple marketplaces simultaneously via powerful search engines that focus on user experience and price and (ii) specialist distribution platforms (OTAs) that are targeting niche audiences including The Plum Guide for luxury home rentals or Dayuse which offers hotel bookings ‘by the hour’.

➡ With the Covid-19 outbreak impacting the travel sector more than any other industry, travel startups will be forced to continue to adapt to new consumer behaviours. This will likely translate into a new generation of startups, focused on different use cases including, for instance, travelling closer to home. The event industry is reinventing itself and some long haul travel may also be replaced by online remote events.

Retail & Ecommerce

In the past 5 years, venture capital investment within the retail category in Europe has risen from €885m in 2014 to €966m in 2019 (+2% CAGR vs. -3% CAGR for worldwide retail investments). 14% of all VC investments in retail were made in Europe (vs. 16% on average for all categories).

In the past 30 years, the consumer adoption of marketplaces and e-commerce websites has risen dramatically. We are now using these platforms on a daily basis and long gone are the days when consumer marketplaces were dominated by eBay and Craigslist.

  • P2P marketplaces, Depop and Vinted, are growing , driven by key technological enablers such as the ubiquity of high performance smartphone cameras and mobile payment (Apple and Google Play)
  • Sustainability is a rising concern for consumers who are ready to shift their consumption behaviors from owning to renting (e.g. Grover for electronic products, Lookiero for fashion) as well as from first-hand to second-hand products. Vestiaire Collective (luxury fashion), Vinted (fashion) and Backmarket (electronic devices) are proving that it’s possible to create large businesses with second-hand products.
  • Consumers are also valuing independent resellers. Shopify’s stock price is at an all-time high, notably because the company is empowering independent merchants. Trouva and Otrium are embracing this trend by building marketplaces that aggregate independent merchants.
  • Amazon remains the elephant in the room. Some companies are working hard to build better verticalized consumer experiences outside the ultra-dominant marketplace, such as ManoMano, Singulart and Backmarket.

Housing

In the past 5 years, venture capital investment within the housing category in Europe has risen from €94m in 2014 to €842m in 2019 (+55% CAGR vs. +48% CAGR for worldwide housing investments). 9% of all VC investments in housing were made in Europe (vs. 16% on average for all categories).

  • Housing proves to be a resilient market, as demand still outstrips supply in larger cities. The shift to suburbs has failed to materialise so far. Millennials still want to become homeowners and are hungry for alternative mortgage options. In city centres, where home prices have skyrocketed, new rental models struggle to be competitive compared to traditional renting, so they focus on gentrifying areas.
  • Community is a growing demand as cities struggle with a loneliness epidemic. Coliving will benefit from this trend.
  • It has proven harder than expected to disrupt local agents and generalist incumbent portals. The market is not driven by prices. Besides, transaction-based models (brokerage, marketplace) are very dependent on the macroeconomic context and are on shaky ground (e.g Nested and Yopa).
  • Companies, like coliving operators or iBuyers, look at both equity and debt funding, which results in inflated fundraising announcements. The sector attracts large amounts of money from institutional investors. Once a new asset class, such as coliving, reaches a 3-year track record, more money will pour into this industry.
  • Property operators can choose between acquiring buildings, leasing them for 10+ years, signing a revenue sharing contract with the landlord. The best approach is one that is opportunistic and depends on the asset appreciation.
  • People spend billions on home improvement and yet, Houzz fired 20% of its workforce in 2019–20. It has proven to be difficult to check the quality of a contractor’s work.
  • The smart home is Big Tech’s next frontier, making it hard for newcomers to enter this space. When it comes to the energy segment, regulation (e.g. the gas heating ban for new homes from 2025 onwards in the UK) and subsidies are the main drivers for new solutions.

Gaming

In the past 5 years, venture capital investment within the gaming sector in Europe has risen from €125m in 2014 to €758m in 2019 (+44% CAGR vs. +6% CAGR for worldwide gaming investments). 30% of all VC investments in gaming were made in Europe (vs. 16% on average for all categories).

  • Gaming is the largest culture-related category — bigger than the film and music industries. It generated $152bn in revenues in 2019 and is forecasted to reach $196bn in revenues by 2021.
  • Mobile gaming is driving the growth of this category. Casual gaming is enjoying the most downloads on app stores and is leading the pack. Following the success of Voodoo (rumoured to be exiting at a $1.5bn enterprise value) and Lion Games, European VCs have made several bets on this segment (Madbox, Popcore, Homa Games). To be successful, we believe that this new generation of players will have to go beyond the hyper casual segment which has become too competitive (increasing CPI, ad-fatigue) and find a product market fit elsewhere in the mobile app industry (mid-core games or other categories).
  • Barriers to creating gaming experiences are reducing dramatically. On the one hand, developers now have access to better tools (Unity, Unreal Engine) to create games more efficiently and quickly. On the other hand, gamers are also able to build their own gaming experiences with user-generative content machines (Minecraft, Roblox, Super Mario Maker etc.). In Europe, we are still looking for no-code platforms to create gaming experiences or games with strong built-in UGC machines.
  • Games are also becoming the new playground. Fortnite is the best example of this trend. It’s much more than a game. It’s a place to hang out with your friends, to discuss and live common experiences — be it a battle royale session or a Travis Scott live concert. The next social network will be a game and we are expecting the rise of a new generation of European multi player games (Klang, Mainframe).
  • The eSport ecosystem is starting to be structured around leagues based on gaming franchises. Europe has strong eSport teams like G2, Vitality and BLAST that are participating in these leagues with the promise to close the monetisation gap between eSport (~$5 per viewer per year) and traditional sports organised in leagues (~$60 per viewer per year).
  • Regarding cloud gaming, it will be hard for independent European players (Shadow and Hatch) to compete with Microsoft and Google which are more vertically integrated with their cloud operations (Microsoft Azure, Google Cloud) and their gaming development activities (Stadia, Xbox).
  • We are also excited about gaming as a consumer category because it is at the forefront of many technological innovations (AR, VR, cloud, 3D etc.) that can be recycled in other consumer and business categories. Just take a look at what Unity is doing beyond gaming in the automobile or construction sectors for instance.

Entertainment

In the past 5 years, venture capital investment within the entertainment sector in Europe has risen from €206m in 2014 to €577m in 2019 (+23% CAGR vs. +13% CAGR for worldwide entertainment investments). 8% of all VC investments in entertainment were made in Europe (vs. 16% on average for all categories).

  • Current social networks are broken because they are monetised through advertising and value content over interactions. This is why we invested in Yubo — a video-chat app for the gen. Z. This is also why we believe that new safe-space social networks will emerge, focused on group chats (like Yolo) or specific demographics (Peanut for women, Jodel for neighbours).
  • “Are our eyes really worth 10 times more than our ears?” Daniel Ek (Spotify’s CEO) is right. Audio is undervalued compared to video. In Europe, we know this, thanks to the successes of Spotify and Deezer. We are bullish on the second wave of audio consumer startups especially around podcasting (Podimo, Sybel, Majelan), learning (Blinkist, Curio) and social networks.
  • Mobile apps based on a subscription business model are also rising (Blinkist, Curio, Mojo, Bending Spoons etc.) for all-you-can-eat types of entertainment. Spotify and Netflix have opened the door for this monetisation mechanism. We believe that we are still in the early days and that numerous optimisations inspired from the SaaS universe will be applied to these businesses.

Education

In the past 5 years, venture capital investment within the education sector in Europe has risen from €118m in 2014 to €393m in 2019 (+27% CAGR vs. +16% CAGR for worldwide education investments). 10% of all VC investments in education were made in Europe (vs. 16% on average for all categories).

  • Many wish they were lifelong learners. According to Bain, “by the end of the 2020s, automation may eliminate 20% to 25% of current jobs, hitting middle to low income workers the hardest.” We must reinvent ourselves continually to remain relevant for the world of tomorrow.
  • OpenClassrooms, Livementor and Jolt are offering education programs to upgrade our knowledge either to facilitate a career shift or to extend our knowledge. Entrepreneur First can be considered a serious contender to MBA programs, helping experienced professionals to start a venture.
  • Primary and secondary education is becoming more accessible and personalised. Online learning makes tier one education accessible to anyone with a simple internet connection. Just take a look at the library of classes from the Khan Academy or the growing education scene on Youtube, with classes on every topic you could ever think of. . Students should also have their learning tailored to their personal needs and technology is giving the tools to teachers and parents to make this model sustainable at scale.
  • Higher education is also ripe for disruption. New financing models like Income Share Agreements are emerging to ease the student financial debt ($1.5tn burden in the US) and realign the interests of universities and students (cf. Lambda School and Blair). Project-based education is replacing the traditional and outdated classroom learning (cf. 42 and Le Wagon).
  • Gamification is becoming more prevalent in the education sector in Europe with startups like Kahoot! or Easybrain and in the United States with startups like Duolinguo and Masterclass. This acts as another lever to make education more accessible but it also has great education virtues (making learning visible, increasing motivation, personalisation of the learning experience, etc.)

Wellness & Beauty

In the past 5 years, venture capital investment within the wellness & beauty category in Europe has risen from €207m in 2014 to €334m in 2019 (+10% CAGR vs. +3% CAGR for worldwide wellness & beauty investments). 15% of all VC investments in wellness & beauty were made in Europe (vs. 16% on average for all categories).

  • People (especially millennials) are willing to allocate a higher wallet-share into wellness and this is done mostly via monthly or yearly subscriptions. 3 main activities are particularly in demand from consumers: mindfulness, nutrition and fitness.
  • The health paradigm is shifting from curative to preventative. With healthcare costs becoming an increasing burden for states, insurances and individuals, the entire healthcare ecosystem and consumers alike are focused on prevention. Consumers are looking for ways to achieve a healthier lifestyle, hence the emergence of nutrition apps that help with weight related challenges (e.g. Second nature) and mindfulness apps (e.g. Meditopia) that help with stress. Some insurers are even making mental health one of their top priorities and partnering up with mindfulness apps to offer them to their clients.
  • Technology is helping achieve personal goals in a way that was never possible previously. Personalisation — with the advent of AI — is making wellness apps much more relevant and impactful for consumers by personalising fitness classes (e.g. Freeletics) and personalised diets (e.g. Lifesum, 8fit).
  • Margins in the beauty industry are very high (especially in some premium subcategories) and consumers are reluctant to spend their money on average or poor products. Hence, we are seeing D2C brands emerge such as Beauty Pie, Hundred or Typology.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store