Posts Tagged ‘venture capital’

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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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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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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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Best Exit

Friday, April 23rd, 2010

Following the big boom in the field of private equity and venture capital in 2007 a number of contracts are set to terminate, and the question “what next?” arises. The two main options are the ‘normal’ selling off (Trade Sale, Secondary Buy-out) of the company or going to the stock market (IPO).

In recent times, investors have chosen to follow both options simultaneously in an auction format, in order to generate greater price competition. According to Michael Schlitt, an expert on corporate funding, “many private equity investors will wait until the last inute to decide which route to take, in order to gain insight into the various price indications, to gain a better negotiation position”, and to maximize their profits.

Generally, the most financially rewarding strategy is going to the stock exchange, also known as ‘Initial Public Offering’. Through this strategy a company can strengthen its autonomy through a greater range of owners and gain greater visibility. However, it is a very cost-intensive measure, thus only very successful companies have this option. Furthermore, there is always the threat of a takeover of the company by a bigger one.

Trade Sale is often a lot less costly, both in time and in capital. In this scenario a big company will buy large shares of another, or even purchase it completely. This may bring conflicts between the new owners and the management, as the company is no longer autonomous. However, the profits of this method are quite high, in some cases even higher than those of going to the stock exchange.

Secondary Buy-out is less popular, as one investor buys the company from another, thus the profit margin is relatively low. Another option would be for the founder or the management of a company to buy it back from the investors, but this rarely occurs, as the funds of the capital acquirer are generally bound to the company.

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Ninth Heidelberg Innovation Forum on the 22nd of April, 2010: Cleantech and Green IT

Friday, April 9th, 2010

26 Cleantech and Green IT companies present their business ideas at the Heidelberger Innovation Forum on the 22nd of April, 2010.

The Keynote speakers this year are Wolfgang Seibold, partner at Early Bird Ventures, and entrepreneur, investor and founder of Beyond A Strategy Inc., Mona Pearl.

Since 2005, the Heidelberg Forum has helped early-stage companies find suitable investment opportunities, with great success: during the past events 250 entrepreneurs from 10 different countries presented their innovative ideas and more than half of them established valuable contacts to important investors in their respective sectors.

The conference will take place at the Studio of the Villa Bosch and the evening reception will be at the Palais Prince Carl in the old city of Heidelberg. During the evening reception, the best business idea will receive an award.

Please see the following link for any further information: http://heidelberger-innovationsforum.de/index.php?id=139&L=3

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