The VC Market in Europe
![Europe](/uploads/1/3/9/2/13926890/4925456.gif)
Europe
One of the keys
to long-term growth for any market is entrepreneurial activity; yet financing
these ventures can be full of challenges. Entrepreneurs need to have the
skills, ideas, and courage to begin a new venture. They also need to be able to
convince outside investors to provide them with the necessary funds. Due to the
high-risk nature and intricateness of these ventures, successful venture
capital investing requires the active involvement and hands-on approach of
an extremely successful entrepreneur and venture capitalist such as Efraim
Landa. Without this sort of assistance with management and close monitoring, in
addition to the initial capital, many ventures would not be able to take off.
Furthermore, getting a decent return on investments into startup firms within a
reasonable time frame requires that capital markets are developed enough to
allow for exits either through an initial public offering (IPO) or trade sale.
The European venture capital market is a large and complicated entity with many opportunities and challenges for investors. One of the biggest challenges that investors face in Europe is the prolonged pressure that is placed on small businesses. These businesses are always facing the possibility of consumers with less disposable income because of issues like wage deflation and increased income tax. Risk has become more expensive in the European venture capital market as a result of the excesses that led to the dot.com burst. When risk becomes more expensive, it becomes more ‘risky’ in a sense. When the dot.com bubble burst, many private equity investment firms were forced to write off large portions of their investments. This shook confidence throughout the market and made investors more skittish when it comes to funding startups. Recently, confidence has started to return to the market, but progress is slow. With fewer exits, investors have to wait longer to recoup their financial returns. This problem is compounded by the general contraction that the market is experiencing, which makes it much harder for venture capital firms to raise funds.
Progress
Some progress is being made in the European venture capital market. Taking the broadest possible interpretation of the tech sector (Communications and Networking, Electronics and Computer Hardware, Semiconductors, Software, Consumer Information Services, and Media and Content) the good news is that during the period 2000 to 2012, while both the number of deals and deal value fell dramatically, the average deal size has slowly climbed since 2003. Even though there are less deals taking place, the size of these deals is increasing.
Strategies for Attracting Venture Capital in Europe
One of the unique factors of the venture capital market in Europe is that it is made of so many different countries with different laws, tax situations, and other considerations. It’s important when seeking venture capital to find the countries that have the most venture capital firms. You’ll want to find the firms that invested the most over the past few years. See what types of investments these firms have been making by researching the market. This will help you to identify which investment firms might be more likely to invest in your venture. It would also be wise to research the funding history in your segment of activity to see who has been funding other, similar startups. This will also help you to get a grasp on how much capital these firms might be willing to invest.
The next step in securing venture capital in the European market is to create a highly organized business plan. This plan should give a prospective investor all of the information they will need to make a decision in a concise manner. It’s important to remember that this will probably be the first meeting with an investor and first impressions are very important. European investors are looking for professional and highly developed plans. With the market just now slowly recovering from the over investing that cause the dot.com bubble, many investors are weary of businesses that are not airtight. It is also possible to get funding from more than one investor in the European market. There are many firms and it may be possible to get some funding from one investor and some from another until all the capital that is needed is in place.
The European venture capital market is a large and complicated entity with many opportunities and challenges for investors. One of the biggest challenges that investors face in Europe is the prolonged pressure that is placed on small businesses. These businesses are always facing the possibility of consumers with less disposable income because of issues like wage deflation and increased income tax. Risk has become more expensive in the European venture capital market as a result of the excesses that led to the dot.com burst. When risk becomes more expensive, it becomes more ‘risky’ in a sense. When the dot.com bubble burst, many private equity investment firms were forced to write off large portions of their investments. This shook confidence throughout the market and made investors more skittish when it comes to funding startups. Recently, confidence has started to return to the market, but progress is slow. With fewer exits, investors have to wait longer to recoup their financial returns. This problem is compounded by the general contraction that the market is experiencing, which makes it much harder for venture capital firms to raise funds.
Progress
Some progress is being made in the European venture capital market. Taking the broadest possible interpretation of the tech sector (Communications and Networking, Electronics and Computer Hardware, Semiconductors, Software, Consumer Information Services, and Media and Content) the good news is that during the period 2000 to 2012, while both the number of deals and deal value fell dramatically, the average deal size has slowly climbed since 2003. Even though there are less deals taking place, the size of these deals is increasing.
Strategies for Attracting Venture Capital in Europe
One of the unique factors of the venture capital market in Europe is that it is made of so many different countries with different laws, tax situations, and other considerations. It’s important when seeking venture capital to find the countries that have the most venture capital firms. You’ll want to find the firms that invested the most over the past few years. See what types of investments these firms have been making by researching the market. This will help you to identify which investment firms might be more likely to invest in your venture. It would also be wise to research the funding history in your segment of activity to see who has been funding other, similar startups. This will also help you to get a grasp on how much capital these firms might be willing to invest.
The next step in securing venture capital in the European market is to create a highly organized business plan. This plan should give a prospective investor all of the information they will need to make a decision in a concise manner. It’s important to remember that this will probably be the first meeting with an investor and first impressions are very important. European investors are looking for professional and highly developed plans. With the market just now slowly recovering from the over investing that cause the dot.com bubble, many investors are weary of businesses that are not airtight. It is also possible to get funding from more than one investor in the European market. There are many firms and it may be possible to get some funding from one investor and some from another until all the capital that is needed is in place.