VC market in Europe
Effi Enterprises is a venture capital firm that was founded by Efraim Landa. Over the years, venture capital has gotten a bad rap because its purpose is largely misunderstood. In simplest terms, VC is a type of funding which involves venture capital firms, like Effi Enterprises, investing large sums of money in exchange for equity in the company. As a general rule, venture capital firms look specifically for start-up or emerging companies which have an exceptionally large potential for growth. The plan is usually that the company should be able to go from inception to an IPO in 10 years or less. While there are very large risk factors and there are many which have failed, some of the more common names of companies that were funded by a venture capital firm include Apple, Facebook and Google. An entrepreneur has an idea, starts a business and simply needs the capital that can be provided by a VC firm.
History of European VC
As an asset class, most experts feel that the VC in Europe has been a failure. Most of the “big names” in venture capital firms have dissipated. Some of the big players from the late ‘90s have moved on to buyouts, been acquired by other companies, watched their team of investors move on or just disappeared. The larger venture capital firms concentrate more on early stage investment now than capital funding. Over the last 15 years, the entrepreneurship as a whole has changed drastically. There are still some successful investment firms such as Spotify, Seatwave, Shazam and Monitise which all have valuations which are in excess of 100m EU. And some of the firms that VCs had successful exits from, like Skype and Autonomy have become major players in the business world. There are a few entrepreneurs which have found success without the help of venture capitalists. These companies include Ten UK by Alex Cheatle and a second venture by Glen Manchester, Thunderhead.
Present State of VC in Europe
Most of the experts agree that the VC industry across Europe is far under par, especially when compared to the US. They work on similar principles, but there are some external factors in Europe that make it very different from American firms. One thing that the European VC market has going for them is that they focus largely on technology. In Germany, Mittelstand manufactures several different precision engineered products that lead the world in market shares; and the Swiss are way ahead in food and chemical technology. However, as a whole, the market in Europe has performed very poorly. There are a few funds that are doing real well but these are the exception. Overall it is the French who are quickly becoming the biggest supplier of VC. It is up to the venture capitalists to convince investors that Europe is an excellent place to invest their cash. Many of the better functioning new initiatives are ending up relying on public funds. But the government is beginning to see that innovation is the key to a successful future and they are starting to close the “equity gap.”
Predicting the Future in Europe
Even though many experts feel like the European venture capital market is below par, there are many who feel like there is reason to believe that it will begin to grow. One reason is that the VC industry in Europe has decreased, but this means that returns should begin to improve. Over the last few years, the valuations in Europe have been low which has caused an increase in the number of venture capital firms from the US looking into investing in the European market. There are more startups and entrepreneurs emerging which is certainly a good sign. And the government is beginning to understand how important startups are to the growth of employment rates. The government is implementing policies which help encourage entrepreneurship which helps create more opportunities for the VC industry.