Why B2B startups will be the dominant startup species in Europe

The recent wave of European unicorns is dominated by B2B startups. About 60% of the European startups that gained unicorn status in the first quarter of 2021, have a B2B business model. And with Celonis we’ve just seen a new B2B ‘decacorn’, the first one to have risen out of Germany.

But why are European B2B startups increasingly successful, and what makes them so attractive for investors?

1) Excellent technology is part of Europe’s DNA

Engineering know-how and scientific innovation is part of Europe’s DNA. Bullet-proof technology has been the foundation of the continent’s strong industrial heritage. Over the last years, we have seen deeptech startups rise out of Europe building key technologies that are paving the way for the digitization of entire industries, driven by visionary founders with bold ambitions. If we can connect engineering excellence as well as our entrepreneurial talent even more, we will be able to see more B2B companies such as Celonis, Sennder or cargo.one who are on their way to become global category leaders out of Europe.

2) Growing number of enterprise customers  

With rising pressure for change in corporates and entire industries, the procurement departments of incumbent players increasingly purchase from and collaborate with startups. Key infrastructure technologies such as cloud computing have already laid the ground work for a fast transition into a new era. After all, we have seen a mindset shift towards startups within established companies, from innovation to proof-of-concept projects to being perceived as a relevant supplier for the business. Combined with a growing maturity of the offering of B2B startups, as well as the growing understanding for digital solutions, this creates the perfect time for startups offering solutions that help manage the needed transformation. The global pandemic has even accelerated this trend, as agile B2B startups offer the right solutions to support this transition. We are experiencing this change with our Next47 Go-to-Market team every day supporting our portfolio to grow their revenue.

3) Global opportunity by day one

Once a solution is found for a market or use case, it can easily be rolled out to companies sharing the same specific problem regardless of national borders. As opposed to B2C startups which often operate on a regional level and which often face different consumer needs, lifestyle, and culture in different geographies, B2B founders can think and go global right from the start, which very often means addressing a bigger market. At Next47, none of the companies we have invested or seen at Series A stage have local market revenue alone.

4) Today’s B2B startups have better exit opportunities

Although recent developments suggest that every startup will become a unicorn and sooner or later moves towards an IPO, we all know that this is not the case. So, let’s keep M&A deals in mind as a key exit option. In addition to the continued trend of US tech companies acquiring European startups, there is also an increasing number of European corporates buying local startups. And as the European ecosystem matures, there will also be more high-growth tech companies that will grow through M&As to secure their market position and expand. With increased exit opportunities of B2B startups, the space becomes again more attractive for investors.

With these four aspects gaining momentum, we will certainly see the current B2B trend as the beginning of a new era: the era of B2B startups as the dominant startup species in Europe.