Tectonic Shift and a 10X Exit for European Venture Capital


February 11, 2013

Go4Venture’s latest research says there’s a “tectonic shift” in European venture. Deal value has been increasing over the past three or four years, but the number of deals is down, illustrating the shift in the venture market.

The key points are highlighted below.

– Venture financing and venture capital are separating into two distinct fund categories

– VCs have largely deserted early-stage and are now focusing their attention on expansion capital.

– High risk/high reward, early-stage investment is being left to business angels, government-subsidized funds, and a handful of the larger VCs which can afford to subsidise this largely money-losing activity to feed their larger later-stage funds.

– December’s activity reflects the trends state above with five late-stage and five Series B transactions – no real Series A.

– Trivago was acquired for EUR 0.5 billion by Expedia, for an estimated 5x historical revenues. The analysts estimate that the deal was a ten-bagger for Trivago’s investors. “A trade sale over EUR 100mn is not that common in European venture, so a deal of half a billion euros  and a “ten bagger” is an exceptional event,” they wrote. (This editor adds that a 10-bagger in VC is an exceptional event anywhere, including Silicon Valley)

The implication of the exodus from European VC is that the first steps of any company will have to be bootstrapped, funded by family, friends and fools or simply by the founders themselves. And even internet companies need to have market traction before VCs are prepared to commit. (Image source: Go4Venture)

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