Europe’s venture capitalists suffer from “an almost delusional level of overconfidence,” says Chris Davison, who runs research at AltAssets, a London-based company that publishes data on the venture capital industry. As proof of his assertion, Davison cites a recent AltAssets poll of 125 private equity firms, which finds that 78 percent of respondents expect a big shakeout of poorly performing funds over the next few years. So far, so good. But virtually none of those surveyed believe that their firm will be among the vanquished. Need more proof? The 32-year-old researcher’s poll also shows that 52 percent of the venture capitalists describe themselves as “top-quartile” performers.
“Many of these guys have clearly not admitted to themselves how bad the market is,” says Davison, a former editor of European economic and financial news at Bridge Information Systems. Davison also finds that, on average, the venture capitalists expect their firms to generate annual returns of 17 percent over the next five years.
What could possibly give venture capitalists a dose of reality about themselves and their prospects? “Two words,” says Davison. “Market forces.”
