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European Seed investors eyeing AI investment opportunities more, says report

Artificial intelligence is the most sought after investment opportunity by Seed investors in Europe, a new survey report has revealed.

The report, called “Sentiment of Seed Investors in Europe” was conducted by London-based Series A venture capital fund Mosaic Ventures, and also found that investments in female entrepreneurs have risen.

The results were promising overall. The report estimates that Seed activity in Europe more than doubled between 2013 and 2017, bringing it to approximately 30-40% of Seed deal volume in the US.

According to Mosaic Ventures, 44 funds – including accelerators – made six or more investments each year between 2015 and 2017.

The increase in investment, the report suggests, could be due to the fact that more than a third of Seed investors think it’s becoming easier to raise money, both from existing and new limited partners. Furthermore, half of investors say their portfolio startup’s ability to raise Series A or Seed extension has improved in the past 12 months.

Just one in six investors say it’s become more challenging to raise money from existing LPs, and fewer than one in 10 say it has got harder for startups to raise follow-up funding.

Simon Levene, co-founder and partner at Mosaic Ventures, commented on the news: “Seed stage marks the inaugural moment of every startup’s lifecycle. The investors making the early bets are pivotal in shaping a startup’s ability to succeed over the coming years.

“In conducting this research, we specifically set out to capture the sentiment of the Europe-based seed investment ecosystem. This report reflects a moment in time (the second half of 2017), and takes the temperature of the investor community, building a picture of the seed landscape,” he added.

This report comes at a time of political uncertainty as the UK’s impending Brexit looms on the horizon. While most investors the UK’s departure from the EU has had little impact on their plans, a quarter of respondents say it has made them less likely to invest in UK companies. Unsurprisingly, though, the political instability has had a considerable impact on hiring, with 41% of respondents saying Brexit is making recruitment harder for their portfolio companies.

At the same time, according to 60% of investors, the quality of startups has improved in the past 12 months. Also, in a promising move for tech’s gender diversity, 32% of investors say they have made more investments in female CEOs and co-founders over the past year.

In terms of sectors, AI came out on top, with 70% of investors saying that it offers the most exciting prospects at the moment. This was followed by Saas (64%) and marketplaces (61%).

Digital health trailed behind at 54% and FinTech fell at 52%. E-commerce fared the worst; with 61% of investors disinterested in, or actively avoiding it. One third say the same of VR and AR, and 24% for the Internet of Things.

This report surveyed 60 leading investors from across the continent. Some 43% are based in the UK and 22% in France or Germany.

Pawel Chudzinski, of participating investor Point Nine Capital, said: “We have seen the quality and quantity of startups on the continent continually increase over the last few years. This trend is bound to continue, as more repeat founders and experienced startup execs take a second or third run at building a business and as the surrounding ecosystem continues to grow in maturity.”

Alice Bentinck, Entrepreneur First, concluded: “It is best to see Europe as one, large collaborative ecosystem, rather than a collection of nations in perpetual competition. With this in mind, it is fantastic to see seed firms increase their presence across the continent, while maintaining a robust presence in the traditional centres of gravity.”