This content is from: Corner Office

European Venture Capital Fundraising Hits Post-Crisis High

Investors are pouring billions into European venture capital companies, with information technology start-ups attracting the most capital.

  • Joe McGrath

Venture capital fundraising in Europe has returned to its highest level since before the financial crisis, with investors particularly attracted to companies in the fast-growing financial, information technology, and biotechnology and healthcare sectors.

European venture capital funds raised €6.4 billion ($5.6 billion) in 2016, higher than any year since 2007, when they raised €7.7 billion, according to a new report, “The Acceleration Point,” published on Tuesday by industry trade association Invest Europe. Last year’s total represents a jump from the €5.5 billion raised in 2015 and is double the €3.2 billion raised after the financial crisis in 2009.

The largest chunk of venture capital invested last year (almost €2 billion) went to companies in the IT sector, followed by companies in the biotech and healthcare sector, which attracted €1.2 billion in new investment, according to separate figures compiled for Institutional Investor by Invest Europe and the European Data Cooperative (EDC).

Patrick Reeve, managing partner at VC investors Albion Capital, tells Institutional Investor that leaps forward in science and technology in recent years have led to a greater number of companies offering credible investment opportunities. He cites examples including companies specializing in big data, cyber security, digital healthcare, and life sciences.

Over the past five years, venture capital firms have achieved returns from investments in now globally recognized companies such as Facebook, Twitter, and Shazam. In Europe, investments in companies such as mobile gaming group Supercell and online real estate agent Purple Bricks have also proved to be successful.

Fredrik Cassel, partner at Pan-European investment house Creandum, said in the report that institutional investors are being drawn to the sector because of good quality new companies that have sprung up in recent years.

“Institutional investors are taking note and are committing capital to Europe’s highly experienced VC teams to generate strong returns,” he said.

Nenad Marovac, managing partner at venture capital investment firm DN Capital, tells Institutional Investor that while 2016 shows “a good landmark figure” for institutional European VC investment, he thinks more investment into venture capital is inevitable.

“There are still a lot of institutional investors that are not really playing in the sector... So there is more to come,” he says.

However, Marovac adds that the U.K. could be negatively affected after it leaves the European Union if the investment from the EU’s European Investment Fund, a public-private partnership designed to facilitate investment in small and medium-size enterprises in Europe, is withdrawn.

“If the EIF pulls out of the U.K., then the U.K. is going to have to move extremely fast, otherwise a large part of the venture capital industry in the U.K. could be at risk,” he warns. A spokesperson for the U.K. Treasury did not respond to a request for comment. A spokesperson for the Department for Exiting the European Union declined to comment.

News of early-stage interest in venture capital investment in Europe from institutional investors follows a similar trend emerging in the U.S. and Asia. A report in May from industry group Preqin found that global venture capital assets stood at $524 billion, compared with $271 billion at the same point in 2008.

A separate report from the same organization found that capital available to venture capital fund managers stood at $176 billion at the end of the first half of 2017.

Reeve says the rise in available capital is due to the “pace of technological change,” which he thinks is ensuring that new investment opportunities will come to market much quicker than they did previously.