European Venture – Full Steam Ahead

March was a record month in terms of number and value of large transactions (more than £5mn, €7.5mn or $10mn). This underscores both the level of activity in the European venture market (c. +40% vs. 2012 on a month-to-month and year-to-date basis) and the growing activity at the large deal end of the market fuelled by internet, late-stage and growth equity transactions (all the market growth come from the Larger HTI and Landmark – more than €20mn – transactions). By contrast the M&A market as a whole is fairly lifeless, even if we start to see a few glimmers of hope, both above and below our reporting threshold (> £30mn/€35mn/$50mn).

From a stage standpoint, late stage is still leading the way, but the authors of the Bulletin also report a surprisingly strong show of A and B investments: “we would read this as a growing confidence of investors aggressively backing new startups and following through on exciting investments. Of course this concerns primarily internet-related investments (and by derivation cloud-based software) but we also see a handful of bold plays in medtech and cleantech.”

Apart from the level of activity, a striking feature of March investment was its geographic spread, with Germany becoming Europe's largest investment destination as measured by the number of Large HTI investments (5) reflecting the dynamism of the country‟s internet market. What is also striking is Germany‟s ability to mobilise quite considerable capital early, and from outside the country at that (Greylock Partners, Summit Partners, Index Ventures, Union Square Ventures and Reed Elsevier Ventures to name a few of the foreign investors involved - by order of appearance in our Bulletin). So this is not a case of in-country over-enthusiasm (as during the heyday of the Neuer Markt of the 1990s), but indeed the world‟s acknowledgement that Germany is Europe‟s largest internet market, in the context of a large, well-run economy. The counter-example is France, which has lost its traditional number 2 slot, partly because of the drying out of tax incentives to local funds (which have become much more limited), and partly because of the awful macro and perceived anti-wealth creation environment.

The UK is now the second largest investment destination (4 Large HTI investments) with Russia becoming the third (3), at least for the month of March. We have noted Russia‟s progress in the past year. This issue must surely mark a milestone with three Russian transactions (also a record) and in fact two in the same category (hotel price comparison and online bookings). Clearly a number of investors have woken up to the possibility of cloning proven internet propositions for the Russian market, as has been done successfully in other large markets such as Germany or China.

The complete Bulletin can be downloaded at the website of Go4Venture Advisers.