Archive for the ‘Venture Capital’ Category

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Investments up in Q2 2010 – mainly due to buyouts

Friday, September 3rd, 2010

Private equity investments in Europe increased by about 16% compared to the first quarter of 2010 and doubled compared to the same period last year. Capital growth rose by 19% and venture capital by 38% since Q1 of this year.

The strong increase in investments over the second quarter of 2010 can be mainly attributed to the increase in buyouts during the same period of time. Compared to last quarter, buyouts were up 8%, with mid-market deals leading the way with an increase of 21%.

There was also a rise in the number of companies that were financed. The number of financed start-ups increased by 17%, while later-stage companies did even better, registering a 28% increase from the last quarter.

However, the fund raising side shows a much different picture. Here we see a decline in fund commitments to almost all types of funds. Private equity funds in Europe went down by 36% compared to Q1, while the commitment to venture funds even dropped by 66%. Growth capital funds and buyout funds also experienced a downturn. Mezzanine funds on the other hand increased to their highest level since the second quarter of 2007.

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Venture Capital Today

Friday, August 13th, 2010

Venture Capital has not changed all that much in the past year. VCs still look for the same things in a company or product: it has to solve a problem, it has to have a competitive advantage, the management team has to be experienced and there has to be previous buyer acceptance.

The main shift occurs in the type of companies VCs are looking for at the moment. E-commerce and professional services seem to no longer be of interest, which seems odd in light of the success companies such as facebook and twitter have had. The focus has now rather shifted towards companies offering Software as a Service (SaaS), cloud computing and data management.

If you would like to know more about the state of venture capital, please visit: http://bit.ly/aeKcs3

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Why Startups don’t make it past the 5-year mark

Tuesday, August 10th, 2010

The German Federal Ministry of Economics and Technology requested the Centre for European Economic Research (ZEW) to carry out a study on why young companies fail within the first five years of their existence.

The study looked at 3000 companies that closed down between 2006 and 2009. Almost three quarter of these companies at some stage were making a profit, which goes to show, that the study did not only analyze companies without a marketable business model.

The study found out that the main reason why startups do not make it, is that there was insufficient seed capital. Further reasons can be found in unexpected market changes and strategic miscalculations. Thus, companies should make sure they have enough money to sustain their startup and they should be flexible so they can adapt to any market changes.

The Full Study can be found here (only in German): http://bit.ly/9pC6qR

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Pitfalls of contacting a VC directly

Monday, August 2nd, 2010

According to Fred Destin, a venture capitalist at Atlas Venture, VC’s have to carefully filter out what projects to look at closer, as they have too many to scan. Thus, it is often no use sending them your business plan, as they will have no time to look through it in detail and you may get a swift ‘one-sentence turndown’. Instead, you should give a short intro of your company and what you do, and the best way to do this, is by pitching your project at the upcoming European Venture Market in Liechtenstein on the 9th and 10th of November.

You can find the full article by Fred Destin here: http://bit.ly/czUXrQ.

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4 Important Factors when Raising Funds

Thursday, July 8th, 2010
  1. Market. This is possibly the most important factor to consider: is there market demand for your product? If there isn’t you will have a chance even with a mediocre product, however, if there is already a strong market, even an extraordinary product might not do the trick.
  2. Momentum. You have to continuously show that you are working on your product. You need to have people using your product, not just once, but also coming and a good marketing strategy. This will indicate that you have some traction in the market.
  3. Team. You need to have a reliable team around you. Only hire people you know and that will stand behind your product and work on it with 100% effort.
  4. Naysayers. If people are saying what you are attempting can’t be done, that is a good sign. It means that they don’t know how to do it and as a result you know you have discovered something new.

For a more detailed account please see http://bit.ly/d99jDF

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65% Rise in Clean Tech VC Investment in the first half of 2010

Monday, July 5th, 2010

The trend is continuing as once again we see a rise in Clean Tech investment. The preliminary results for the second quarter of 2010 show a total investment of 2.02 billion USD in 140 different companies. There was a slight decrease compared to last quarter (2.04 billion USD), but an increase of 65% in the first half of 2010 (4.02 billion USD) compared to the same period last year.

The forerunner of the investment increase was the solar sector with 811 million USD alone. This is far ahead of the money put in the biofuels (302 million USD) and the smart grid (256 million USD) industries. Based on the total number of deals, the solar sector was second to energy efficiency, the former having accumulated 26 deals and the latter 31 deals.

North American countries accounted for the largest amount of the total investment, namely 72 percent of 1.46 billion USD. European follows in second with 24 percent or 476 million USD. India (3 percent or 59 million USD) and China (2 percent or 30 million USD) follow in third and fourth respectively.

For more detailed information please visit http://bit.ly/bCrWhR

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The Predicament of the banks

Monday, June 28th, 2010

Many companies have had to cut back on spending during the past year due to the economic crisis. However, this year they want to start spending money again, but the banks remain reluctant to readily give out cash. They have become much more careful when checking the operative cash-flow and the debt of the companies. Thus if you have a high debt and your cash-flow is negative, you have to find a VC, because the likelihood is, that banks will not give you any loans.

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Hard Times for German High-Tech Startups

Friday, June 18th, 2010

The Economic Crisis has led to a decrease of investment in high-tech startups by 70 percent in 2009. The most hard-hit from this have been the high-tech industries, which mainly need money in the seed phase to get off the ground. In 2009, only 8 million Euros were invested in seed funding, which is detrimental, as especially high-tech startups need a lot of money at the beginning.

The Problem is that investors want security that seed funding generally does not offer; most of the time it means high risk and low cost-efficiency. In Germany the selection of high-tech startups is limited, which leads investors to invest internationally rather than locally. Currently there are too few people risking to become self-employed, which is in part due to the lack of seed-stage investments.

The mentality in Germany has to be changed in order to get the startup motor running again. Financing should already occur in the research phase, which will increase the likelihood of people creating startups, as this idea is being encouraged very early on. With private investors not willing to invest in the seed phase, public investors have to step up and help the high-tech market get back on its feet.

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SMEs to lead the way in European economic recovery

Friday, June 4th, 2010

In light of this week being dedicated to European Small and Medium-sized enterprises (SMEs), Antonio Tajani, commissioner for industry and entrepreneurship and vice president of the European Commission spoke on the subject. His main argument was that financial assistance to SMEs is essential for the European economy to recover.

It has been shown that around 45% of Europeans would like to be their own boss, but only 11% of those actually start their own business. If this percentage could be increased, these new creative and innovative companies would rejuvenate the European economic base. This would make it more robust and resilient to economic crisis, like the recent one, and at the same time create many jobs.

Between 2002 and 2008 the number on SMEs increased by 13 % or 2.4 million, which created 9.4 million jobs. In the last two years, following the economic crisis, 3.25 million jobs were lost in the SME area. Of course, SMEs usually can’t help themselves; they need assistance from banks, which recently have often rejected loan applications based on fears of another crisis.

Thus, the onus is on the European Commission to take action and facilitate access to financial assistance. In light of this, the Small Business Act has been created and it “aims to improve the overall approach to entrepreneurship, to irreversibly anchor the “Think Small first” principle in policy making from regulation to public service, and to promote SMEs’ growth by helping them tackle the remaining problems which hamper their development” (http://bit.ly/9Y6be4).

Further measures that the Commissioner aims to take are to create a permanent dialogue between entrepreneurs and financial institutions, a reward system for entrepreneurs and even integrate entrepreneurship into the curriculum at all stages of education. A program called ‘Erasmus for Young Entrepreneurs’, where entrepreneurs can exchange experiences and network, has already been set up.

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More VC Investments – Especially Cleantech sector sees increased funding

Friday, April 30th, 2010

We now see one of our previous entries, ‘KPMG survey confirms positive turn for venture capital in 2010’, proven to be correct. Slowly but surely venture capital investments are increasing again. Compared to the first quarter statistics from 2009, the funding nearly doubled in the same time period this year. However, it has to be noted that compared to the numbers from the end of last year, the amount of funding has decreased by 16 percent. An increase of 77 percent in the total number of fundings was recorded (Q1 2009: 679 and Q1 2010: 1,201). Once again, there was a slight decrease of 5 percent in total fundings compared to last quarter of 2009.

Another aspect of the KPMG survey mentioned above has been confirmed, namely that the cleantech sector would be the main focus of investments. According to a report from Cleantech Group, the investments in cleantech companies totaled USD $1.9 billion, which amounts to an increase of 29% compared to the end of 2009. Compared to the same time last there, the report found an increase of 83%. Most of the recent investments centered on the renewable energy sector.

The biggest investment sector was transportation (USD $704 million), especially infrastructure and vehicles, followed by the solar (USD $322 million) and energy efficiency (USD $217 million) sectors respectively. The largest percentage of venture capital investment took place in North America (81%, or USD $1,5 billion), followed by Europe (14% or USD $257 millio), China (4% or USD $72 million) and India (1% or USD $10 million).

For further information please visit http://cleantech.com/about/pressreleases/Q1-2010-release.cfm

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