The State of Venture Capital Markets in Europe
While the U.S. venture capital market is showing growth and promise this year, it should also be noted that the European market is at the highest its been in last four years. Venture capitalists are committing to more start-ups and offering more money than ever before. In fact, the increase isn’t just coming from within; even U.S. venture capitalists are increasing their spending on European start-ups. Both scenarios are helping to boost the economy.
Although roughly 3,000 start-ups throughout Europe receive funds from venture capitalists and that number is expected to rise this year at a slow and steady pace, the U.S. market is still significantly higher. Currently, it is Germany, France and the United Kingdom that are dominating the market. Combined, the three powerhouses make up for half of the venture capital deals made throughout all of Europe.
Boosting the European Venture Capital Markets
Thanks to the Internet and technology growth, everything has changed and inventors are seeking out new ways to simplify things with updates products and services. There has been a vast increase in creative ideas for new businesses. It is these exciting ideas that essentially spur the growth of the industry, as investors want in on the ground floor of promising new products and services that, with their help and guidance, can become successful and create a huge amount of money for all parties involved. We aren’t just talking millions either. Company buyouts are taking place in the billions, making it a very lucrative investment option.
The History of Venture Capital Markets in Europe
Europe does not have a strong history in terms of successful start-ups. The early companies that stated with venture capitalist investments didn’t hold up in the long run. While famous start-ups like Facebook and Google have become household names, few European companies can boast the same kind of recognition. Skype is possibly the closest claim to fame they really have.
The Path to Further Growth
Corporate investors are certainly necessary to jump start new business concepts, but the market needs more than that to see real progress. The capital venture market is dependent on private investors for further growth. It is imperative to bring these investors on board to help new companies grow and ensure job development.
The Capital Markets Union
The government has come to the conclusion that venture capital deals have a positive effect on the employment rate and the economy in general. They have come up with an idea to flip the switch and make funds more readily available for corporations to support promising start-ups. The goal of the Capital Markets Union is to create more affordable loan options for corporations across the European Union to invest in start-ups. A policy is being discussed that would balance out the bank loans and make it easier for venture capitalists to get financed so they can get involved with start-ups.
The Capital Markets Union could put billions of dollars into the hands of corporate investors. If investors can get loans with more relaxed terms and save money on their line of credit, they will be more likely to throw their hats in the ring, thus boosting the capital venture market in Europe. Ultimately, once the ideas are fleshed out and the policies are in place, this new united market could solve the economic and job market that has been on the decline since 2008.
The Future of European Venture Capitalism
Rather than following America’s lead in terms of investing in start-ups that promise a quick return, corporations in Europe need to tighten their focus on funding successful businesses. It is this track record that actually carries more weight with lenders. Venture capitalists in Europe will also continue to make safer choices than that of their U.S. counterparts who make riskier business decisions in an effort to maximize their payout.
Meanwhile, the European Union is ironing out the proposal for the Capital Markets Unions. The consultation will be finalized on May 13, 2015 One this plan is established and put into play, investors will have more options for obtaining financing through private lenders. This change could have a profound effect on the capital venture market in Europe by making it easier for investors to get the money needed to invest in start-ups.
Posted on May 13, 2015, in History of Venture Capital, Venture Capital, Venture Capital Markets and tagged European Venture Capital Market, International VC Market, Venture Capital, Venture Capital History. Bookmark the permalink. Leave a comment.