EUROPE - Klaus Rühne, a partner in the investment team at ATP Private Equity Partners, has spoken to IPE of his "optimism" about the macroeconomic environment for venture capital.

"In the hot years," Rühne said, "too many business models float around the same idea and don't have sustainability when things go sour. If you invest in an environment such as the current one, the likelihood that you pick up more sustainable businesses is higher."

Over the last 10 years, more and more venture capital investors have grown exhausted with poor returns from the asset class.

In a private equity strategy paper published last year, Towers Watson noted that even upper-quartile VCs struggled to achieve exit multiples of 0.5-times between 2001 and 2006.

That paled alongside the leveraged gains available from pre-crisis buyout funds.

Industry commentators tend to blame these poor returns on the huge increase in fundraising that fed off of the dotcom mania of the late 90s - VC fundraising rose tenfold between 1995 and 2000.

A lot of that money capitalised unsuccessful enterprises at inflated valuations, and mediocre businesses were able to draw on that money for years after the crash - a capital overhang plagued VC as late as the first quarter of 2009.

"In the US, if you look at 1999-2009, returns don't look too bad because you had the advantage of investing as the NASDAQ bubble was growing," said Rühne. "But 2000-10 looks very different."

But now the capital overhand has gone, and the industry is moving into a period of chronic under-funding.

Coller Capital's Winter 2010-11 Private Equity Barometer finds 57% of European LPs anticipating a funding shortfall.

In the US, VentureSource reports fundraising collapsing from $28bn (€20.5bn) in 2008 to $13bn in 2009.

Analysis by VC fund of funds TrueBridge Capital Partners suggests that 366 VCs completed at least three investments in 2009, down from 470 in 2005.

Even well known names struggle to match their previous fundraising. Despite headlines about the frothiness of emerging market and social network valuations, this rationalisation is pushing general pre-money valuations of companies to 20-year lows, in real terms.

Rühne also feels that the exit environment could begin to improve as markets rediscover their appetite for technology. The median time before an IPO increased to 9.6 years by 2008 after hitting just 4.2 years in the late 90s, according to Towers Watson, and the 2000s saw VC-backed IPOs halve from 1990s levels.

"On the whole, we saw very few exits right up to 2008 and 2009,""said Rühne. "Things appear to have picked up in 2010, perhaps more so than most people expected, especially in IT.

"It feels like we might be moving into a period of enthusiasm in the public markets with the social networks and, to some extent, the gaming industry. Indirectly, we have investments in Twitter and also in Zynga, the gaming site that is integrated into Facebook.

"There could be a significant turning point in the exit environment if one or more of those businesses IPOs."

At first glance, Rühne's optimism seems at odds with the findings of Coller Capital's Barometer, in which European and Asian LPs in particular felt that the environment for venture was changing significantly - but for the worse.

But while one-fifth of LPs worldwide think no one in the industry will be able to post strong returns over the next decade, the real consensus - two-thirds - feels there will be strong returns, but concentrated in a small elite of venture funds.

Rühne agreed with this funding.

"I am more optimistic about venture, and you can certainly argue the case that it will thrive more easily than you could five years ago," he said. "But looking at each individual manager, it becomes a question of, 'Can we get access?' and 'Can we be comfortable with the maths [around fees] to invest on a 10-15 year view?'

"But if I were an endowment with access to these guys already, the macro picture would make me very optimistic indeed."

IPE will speak with more industry practitioners about the structural changes occurring in venture capital in its March issue.