The VC Market and Europe
The Euro is the backbone of the European market and Greece has discussed dropping it altogether. What would happen to the economy should Greece opt out of their financial markets? How would this influence the VC market? Greece has a favorable position in the European VC rankings and is performing better than most. Right now there is a good balance between taxes and investors both private equity and venture capitalists. The VC market has been thriving in the European financial environment and overall the market has been ripe for investors. The trends seem to point to favorable outcomes and many more opportunities for the venture capitalists to invest in the future. But if Greece pulls out, it could make for a rocky road in the EU.
The First Quarter European VC Market
During the first quarter of 2015, venture capitalists like Efraim Landa have had their eye on the European market. This is because the VC investments made into European companies were at its highest level since the third quarter of 2001. HV Holtzbrinck Ventures Fund VI was the largest fund during the first part of this year. It ended up being over 30% of all of the VC funds raised in the first quarter. The amount of capital raised by European companies this quarter is an increase of about 40% over what was raised in the final quarter of ’14 even though the number of deals that were actually completed declined by about 5%. Consumer Services got the largest piece of the investment pie in the first quarter at about $1.3 billion raised through over 100 deals. The top venture capital deal of the first quarter was with Rocket Internet which is a Berlin based online food ordering company. They raised an investment of 288 million Euros. Germany was the location to receive 35%, the largest amount of equity financing during this time frame and the UK was just behind them with 34% of the share.
Experts tend to agree that the next biggest source of capital over the next five years or so will be looking to the VC market for financing growth. Entrepreneurialism is a huge driver for asset classes and it’s likely to see numerous innovations driving financial opportunities for new business models as well as new technologies in the near future. Because of the growth in the use of new technology like Smartphones and mobile devices, many VC opportunities are likely to be technology driven. Tied in to technology are some industries that are growing rapidly like the internet and software markets.
Another area likely to expand and be funded through venture capital is life sciences. This is due to the recent emphasis on health and obtaining positive health outcomes. The health industry will collide or coincide with technology because of the vast majority of individuals using health related apps, programs and devices which are used to measure activities associated with fitness.
How Greece Influences the VC Market
Earlier this year, there was discussion about Greek possibly departing from the use of the euro. Most economists hold to the belief that the currency in Europe is fundamental to Germany’s economy, but that it influenced the financial imbalances seen in Greece. Even though the currency is weakened, Germany has been the one region who reaped the benefits indirectly. It is highly unlikely that Greece can recover if they depart from the euro membership. There was a slight increase in the Greek economy in the third quarter of last year – this was the fastest growing euro zone. This growth was attributed to monies contributed by tourism. A weaker currency would influence the cost of imports and this would introduce inflation to the economy of Greece. And creditors from Greece would have to write off some of the debts incurred by Greece for them to sustain their financial standing at all. Otherwise, it is headed for a large collapse. Even if Greece departs from the Euro and makes it, Germany is not as likely to be healthy enough to recover in the long run. With the current condition of Greece and their finances, the citizens may be the ones who ultimately decide whether or not to remain with the euro. A collapse in the region will have a direct influence on the VC market and when and how investors are likely to release funds.
Posted on June 23, 2015, in History of Venture Capital, VC investments, Venture Capital Markets and tagged economic trends, Euro, European Venture Capital Market, Greece, International VC Market. Bookmark the permalink. Leave a comment.