European venture market in 2015 running at twice the rate of 2014

The latest edition of the Go4Equity Monthly Bulletin covers July. From a market standpoint, July was another busy month, with deal funding activity up by close to 30% in value. Another record 26 companies made it to the Large HTI category of Go4Equity (>£5 million / €7.5 million / $10 million). No Mega rounds (> €100 million) were closed in July, but a record 15 Landmark (> €20 million) transactions. To put this data point in perspective, this is in one month the number of Landmark transactions in the whole of 2005 ten years ago, and there times as many as in year 2004.

Just like in the previous month, the activity is of course dominated by internet plays from a sector standpoint, with software second, and medtech and (more surprisingly) hardware making a showing. In internet, marketplaces are all the rage (but successful ecommerce plays get replenished too), with fintech (another variety of marketplaces) a strong sub-theme (both Crowdcube and Seedrs, two of the UK’s leading equity crowdfunding platforms, got financed in July). As far as geography is concerned, UK confirms its prominent position with 40% of the Large HTI transactions, with France and Germany (in that order this month) distant seconds. From a stage standpoint, C and Late-Stage is about half of the activity, demonstrating how further along Europe is, but also where the attention of professional investors is.

This theme of late-stage financings is really what defines this investment cycle. Bill Gurley of Benchmark Capital remarked in one of his August Twitter posts: “We may be nearing the end of a cycle where growth is valued more than profitability. It could be at an inflection point.” Funny enough, after being so bearish on the cycle, Go4Venture has turned more positive of late:

• The bubble is – at least today – contained to professional investors. Hence why Nasdaq is still reasonably priced.
• Although prices for late-stage internet are stratospheric, they support businesses which have real business models, real (substantial) revenues. So if there is a case for mispricing, it is not a write-off (like it was in 2001)
• The only other part of the market where retail investors are involved is equity crowdfunding (an accident waiting to happen) and P2P lending (which is eminently more promising). Smart crowdfunding platforms are evolving to P2P lending (see write-ups on Crowdcube and Seedrs in this issue).

If it also worth reminding ourselves that the premises for the bubble are exogenous, quantitative easing and all. This is where the correction will come from.

(SK)