The VC Market in Hungary
Efraim Landa is an experienced and successful venture capitalist. It is important to realize that a VC firm not only invests monetarily into a company in order to see it succeed, but it also invests time and experience. The goal of the venture capitalist is to provide what is needed for the company to become successful and mature. VC funding is typically aimed at providing what is needed for an early stage company who needs to get started or an established company that has reached a point where they need to make expansions but lack the funding. The venture capitalist invests in the company with the expectation that the company will reach a state where they can make a public offering or sell its shares. Sometimes the VC firm will sell off their shares once the company reaches maturity and become profitable. Exits are a large part of the VC industry. A venture capitalist is interested in a company which displays the potential of making rapid growth in the future. As a general rule a venture capitalist prefers to invest in entrepreneurial businesses and ones which demonstrate innovative thinking and aspirations for growth. Regions around the world have thriving VC sectors which help provide fuel for growing and thriving economies.
History of the Venture Capital Market in Hungary
Over the last 20 years Hungary has enjoyed relatively successful business ventures. Over these two decades, the Hungarian economy saw nearly 4 billion USD invested into over 400 Hungarian companies. In this same time frame, buyouts have accounted for almost 2/3 of the volume of those investments. The problem with that is that the venture capitalists who were making investments were aiming at acquiring shares in mature companies which for several years had been operating profitably. The volume of investments made into expansions and early stage companies was quite a bit lower. During this same 20 year time period if it is looked at as a whole, only 10% of the VC investments were made into early stage companies while about 90% of VC funds focused on mature companies which displayed greater strength and stability economically. Hungary has one of the lowest rates of investments in Europe in terms of early and expansive stage businesses. Less than .2 out of 100 companies receive any funding from venture capital firms. However, over the last few years this situation has begun to improve and there are more VC funds appearing. Since 2011 there have been more jobs created inside the Hungarian VC industry which has helped grow the economy.
Future of the VC Market in Hungary
In the last few years the VC market has made a significant rebound but in order to ensure success three areas will need attention. For one thing there are tax issues that must be improved, there is a need for more incubation programs and there will need to be more regulations inside institutions for VC funds. However, the last few years has seen an increase in the volume of funds invested by VC firms. There are hopes that the low and middle sectors of the market will begin to be more undersupplied by private investors. With each year showing significant growth it is expected that the next few years this trend will continue. Hungary is emerging as a leader when it comes to the VC market in Europe. They are consistently listed in top five economies in the area. In the last couple of years there have been some major success stories and some brands which have reached global recognition and even a couple reaching a place to make a public offering. This offers an encouraging outlook for the coming days.
Posted on September 3, 2013, in Effi Enterprise, History of Venture Capital, VC Firm, Venture Capital, Venture Capital Markets and tagged VC firm, VC industry, venture capital market, venture capitalist. Bookmark the permalink. Leave a comment.