« London's Nomad Down The Line With £8M For Train Connectivity | Main | Mobile Music Download Startup Targetize Says Tech Validated, Wants To Raise More Money »
July 30, 2006
Euro VCs Force Change
Go4Venture always has some interesting analysis of European venture capital trends in its monthly newsletter. The latest highlights some style changes among certains VCs as a survival strategy. The corporate finance advisory also notes that the adoption of private equity strategies by some VCs for tech firms is now an established trend and it has created a new category for Go4Venture's analysts to track.
Venture Capital Investment Activity In June Was Similar To May's Level Of Activity
Here's what else the corporate finance advisory firm has to say:
European tech VC's (or rather VC's operating in Europe) are experimenting in new areas of investment, seeking of course higher returns, but also newer, larger areas to invest in. VC's are under the pressure as well from their investors to deliver meaningful returns, not only in terms of RoI [return on investment] but also absolute returns. After all, in the alternative investment class, they are competing with other types of private equity, hedge funds a wide variety of investment strategies. At stake is the future of European VC as an asset class – no less.
Trends in European Venture Capital
More investment in media companies (Go4Venture calls it "content" )
VC's are acting on the convergence of content (on the back of media moving to "digital only" platforms), telecom services and IT. Digi TV Plus and Sports Media are good examples
Investment in social networking that is difficult to categorize but more of a leveraging of tech than a disruption by technical innovation.
VC's exploring technology’s pervasiveness i.e. VC's are investing in sectors leveraging technology where technology can re-invigorate traditional business models (distribution, retailing, financial services, next generation telecom services), but also creating new services not otherwise possible (e.g. online auctions, marketplaces and these days social networking). The investment in Ipnotic Telecom is representative of this trend.
Go4Venture sees an increase in in alt energy and med tech. This makes sense to us as both have proven to provide good exits for backers in recent times. But the surprise is investments in bioinformatics - it is a category that has so far delivered a steady stream of flops in the European market - with only one survivor that is on the a:c euro radar.
VCs are also getting into entirely new fields such as alternative energies (Microgeneration offers a world of new opportunities) or environmental technologies (“cleantech”). It is also worth noting the increased interest in medical technology and bioinformatics, two areas of life sciences that traditional VC's believe they understand because they are close enought to traditional "tech" (hardware and software).
Buyout strategies by VC continues as a trend
Finally, VCs are increasingly becoming traditional private equity players, with buyout type investments which cover a mix of later stage, public to private and use of leverage. This trend is also partly fed by public markets which have become more demanding, both in terms of the financial performance required of new applicants and the costs and regulation associated with a listing. Another driver is the increasing use of “buy and build” strategies as a way to accelerate revenue growth and generate greater absolute returns. As this type of investments are becoming a feature of the European landscape, we will start tracking them (separately) from next month on. For an example in June, see Springwater Capital acquiring M+W Zander.
Posted on July 30, 2006 03:25 PM | Posted to Venture Capital | Permalink
Trackback Pings
TrackBack URL for this entry:
http://www.thealarmclock.com/mt/mt-tb.cgi/1717
