Go4Venture: Correction in the European Venture market on the horizon

Go4Venture publishes every month a bulletin covering huge investments and M&A exits in Europe. The authors have repeatedly warned that a new bubble is growing and do this again in the recent edition. This time they add a statement about the end of the bubble: “our prediction is that the price adjustment will come around mid-next year. As in 2008/09, the decrease in the end will not be so dramatic (it was -30% to -40% across the board then), but it will likely slow down new investment activity for a while, cash will be at a premium and internal rounds will return. Brace yourself – and be ready next year to go into the market aggressively (as investors currently expect and demand!), but also to adjust your expectations as soon as winds start to turn. And of course valuations will go down, simply because companies won’t be able to raise as much money, but will take the same dilution.”

Investments in October
October, generally a fairly quiet month between the post-Summer announcements and end-of-year closings, was unusually active, with 50% more deals than last year and 20% more money deployed. In many ways, the Go4Venture’s Large HTI transactions profiled in the Bulletin reflect what can be seen in the market as a whole: mobile and Fintech lead the pack, followed by marketplaces and e-commerce technology. Of course late-stage is always on, but there are more Series A and B rounds than in the last months. As mentioned in previous issues, the UK and Germany represent hotbeds of activity, with France very quiet by historical standards (and no French Large HTI transaction this month).

Domains where Europe leads
For the first time, there are domains where Europe can claim a lead over the US: fashion e-commerce, gaming, music and now Fintech. A recent Financial Times article explained how European start-ups Azimo, CurrencyFair, TransferWise and WorldRemit are going after their US competitors (Western Union and Xoom) by setting up shop in the US, taking the fight there even before these US competitors come to Europe. The irony, of course, is that most of these European start-ups are financed by US investors such as Accel (WorldRemit), Greycroft (Azimo) or Sequoia (rumoured to be investing in TransferWise).