Is the European VC market turning the corner?

The corporate finance advisory firm Go4Venture lists every month Exits and VC Investments in Europe in its European Technology Venture Capital Bulletin. Whereas there have been only two VC exits in February 2012 the situation regarding funding is much better. The authors of the report sum up the first months of the year with the statement: “On the funding front, things are holding up.” The number and value of transactions reported in the Headline Transactions Index (HTI) of Go4Venture are approximately the same as last year’s. In fact, if one compares the transactions reported in February 2012 vs. the same month the year before, one would conclude that the pendulum is somewhat swinging back to earlier-stage, with two Series A and two Series B covered out of 5 transactions (vs. all Series C or later a year before). Generally speaking the authors have the feeling that, just at the time as Limited Partners (LPs) have pretty much given up on European VC, the European tech innovation market may be turning the corner. Some of the signs:

• Just like entrepreneurs are urged to shoot for the sky, European investors are now obsessing more often about absolute returns, partly spurned by competition from US VCs who opened in Europe 10+ years ago (Accel, Balderton, Index, etc).
• As a cultural melting pot, Europe starts to realise it has competitive advantages in building global businesses – multi-currency, multilingual and multi-country.
• As they learn to become growth equity players without access to debt leverage, buyout funds are bringing liquidity for VCs and ammunition for companies building global leaders. Interestingly, Europe has a very rich body of buyout funds of all kinds who have done rather well in the past 20 years and have money to spend

All these signs primarily reflect a change of mindset which bodes well for the future of European VC. Time will tell, but the authors of the report feel the tide has turned and the European VC market is – finally – coming to maturity. And just at the time when the breadth of opportunities offered by mobile internet, and the pile of cash hunting for return have never been so large.