A third of Europe's VCs to disappear

EUROPE - European venture capital firms expect to generate net returns of around 17% per annum over the next five years, according to a survey conducted by AltAssets, private equity information company, but the sector could see the disappearance of nearly one third of existing players.

Around a quarter of Europe’s venture capital companies were interviewed as part of the survey, of which 78% admitted to be considering consolidation in some form or another. AltAssets believes around 30% of Europe’s venture firms will fold, however, as they are unable to raise more money or realise meaningful gains from their portfolio companies.

Worst hit, says the report, will be the German market. German firms are much more likely to predict upcoming consolidation, and have the lowest performance expectations. Benelux firms were similarly negative in their outlook. The most optimistic firms were in Central and Eastern Europe, Scandinavia and the UK.

The majority of the respondents blamed waning entrepreneurial culture for the problems experienced in their industry. Entrepreneurs now seem reluctant to expose themselves again to the violent fluctuations of the venture capital industry.

Chris Davison, head of research at AltAssets is unsurprised at the troubles facing the industry. ‘It grew far too quickly in many countries to have had the resilience to withstand the collapse in the technology markets. What is somewhat unexpected is the enduring optimism of so many firms. They know times are bad but they still think they can make the sort of returns they generated during better times.”

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