Europe continued to see a pullback in the number of VC deals during Q2’17, with seed and early-stage deals plummeting. Despite a fifth straight quarterly decline in deals volume, however, total VC investment in Europe remained strong as a result of a number of mega-deals. Three $100 million+ deals together accounted for $1 billion in European VC funding, including $502 million to London-based Improbable, $397 million to Berlin-based Auto1 Group, and $100 million to London-based GammaDelta Therapeutics. Governments set to help plug early-stage funding gaps Several European governments recently announced programs that could help address declines in funding at the seed and angel deal stages. In Q2’17, as part of its commitment to sustaining a strong startup and scale up ecosystem post-Brexit, the UK announced that the British Business Bank would extend the limits on its current venture capital investment program and introduce new supports to help start-up companies and small businesses in the country.8 Germany announced that it would double the amount of VC funding available to start-ups by the year 2020, and invest €2 billion over the next 10 years into the innovation ecosystem9. The French government also announced plans to sell assets to create an €10 billion fund to invest in disruptive innovation.10 B2B hybrid opportunities thriving in Germany In Germany, B2B tech opportunities gained prominence in the eyes of VC investors during the quarter. In Q2’17, two significant deals involved B2B opportunities: a $397.6 million funding round to Auto1 Group and $421 million in private equity funding to Delivery Hero. Both Auto1 Group and Delivery Hero offer mechanisms for companies to provide better services to their diverse customers — a value proposition that is only expected to gain traction across industries over time. Regardless of Brexit plans, UK continues to attract VC investment Brexit concerns continued to be a non-issue for many VC investors in the UK during Q2’17. In fact, London-based virtual reality firm Improbable hosted a $500 million+ Series B funding round during the quarter, making it one of the largest VC deals ever conducted in the country. The ability for Improbable to attract funding during a low risk investment climate bodes well for the robustness of the UK innovation ecosystem. Despite Brexit plans, the country remains highly attractive to startups and investors as a result of its strong talent base, leading universities, and government incentives and support programs. Israel taking the lead in smart transportation Israel has long been a hub for technologies that can foster innovations across industries, such as machine learning, cybersecurity, analytics, and sensors. Intel’s acquisition of Mobileye in Q1’17 only increased the attention investors have been placing on Israel. Because of this, more investments in smart transportation related technologies are expected over the next few quarters. There is also expected to be an increase in investments to Israeli software companies that can maximize the value of new technologies (e.g. platform management, data analytics). 8 https://www.thestreet.com/video/14180135/british-government-launches-plan-to-help-the-country-as-it-leaves-the-eu.html 9 https://www.thelocal.de/20170612/new-german-state-firm-to-give-startups-boost-with-2-billion-injection-report 10 https://www.wsj.com/articles/france-to-create-10-billion-fund-to-invest-in-innovation-1499279714?mod=wsjde_finanzen_wsj_barron_tickers © 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #Q2VC