Europe Venture Financing: Beginning of a Lift-Off?

September 2012 is a bit of a milestone for the European venture financing market with an exceptional large number of Large transactions (above £5mn, €7.5mn or $10mn). September statistics of the latest Go4Venture Bulletin are quite striking:

• 14 Large transactions vs. 8 during the same month last year
• Of these, 7 are Landmark transactions (more than €20mn), to be compared to 24 in the whole of last year!
• The mix is very broad with internet services (primarily e-tailing ) leading the pack, followed by cleantech (technology infrastructure for waste or energy conservation or carbon reduction), the rest being split between hardware, software (SaaS), digital media and telecoms
• From a geography standpoint, the UK is well ahead of others (5 out of 14 profiled transactions i.e. the UK manages to get more than its fair share of the larger financing transactions), with others trailing, and Germany and France doing no better than Russia (2 each).

 
This stronger emphasis on larger transactions is partly driven by new entrants, first and foremost US funds focusing more on the European market (in September JP Morgan, General Atlantic and Insight Venture Partners) and corporate investors (Intel Capital, Rusnano and Softbank).
It is also the result of more aggressive European funds which are surviving the cull that is currently under way and are now thriving. On this note, it is worth mentioning the wealth of post-summer fund closing announcements, including:

• Country leaders in France (such as Idinvest and Ventech for €100mn each) or Germany (Wellington for a €120mn dedicated life sciences fund).
• Established players in the early-stage field such as DN Capital in the UK (€50 million for a targeted €100m) or Active Venture Partners in Spain (€54mn). Please note than both are now straddling geographies with one of DN’s partners in the US, and Active balancing its operations between Spain and the rest of Europe.
• Newcomers, e.g. Connect Ventures (€39mn target), where principals are either ex entrepreneurs or ex Amadeus Capital and Doughty Hanson Technology Ventures.
• Sector specialists such as Demeter in France (€43mn first close) and Emerald Technology Partners in Switzerland (€100mn targeted) in cleantech.

 
These developments make the authors of the report quite optimistic. In their “view it is now only a matter of time before European venture financing finally makes its mark as a bona fide investment class.”
 
The Go4Venture Monthly European TMT Private Investments and M&A Transactions Bulletin provides a summary of corporate finance activity among emerging European TMT companies. It is published by
 Go4Venture Research, the Equity Research unit of Go4Venture Advisers LLP.