• Save
European VC Performance (Earlybird VC presentation)
Upcoming SlideShare
Loading in...5
×
 

European VC Performance (Earlybird VC presentation)

on

  • 2,341 views

Some Findings on European VC Performance (Earlybird Venture Capital presentation)

Some Findings on European VC Performance (Earlybird Venture Capital presentation)

Statistics

Views

Total Views
2,341
Views on SlideShare
2,333
Embed Views
8

Actions

Likes
2
Downloads
0
Comments
0

1 Embed 8

https://twitter.com 8

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

European VC Performance (Earlybird VC presentation) European VC Performance (Earlybird VC presentation) Presentation Transcript

  • EUROPEAN VENTURE CAPITALINDUSTRY PERFORMANCEEarlybirdDecember 2010 EARLYBIRD I 1 I CONFIDENTIAL
  • SUMMARY Imbalance of supply and demand for venture financing has created a very favourable investment environment Visibility on the current opportunity is still limited and prejudiced by poor quality of published industry fund statistics Real performance of European VC already on a rise EARLYBIRD I 2 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • SUMMARY Imbalance of supply and demand for venture financing has created a very favourable investment environment Visibility on the current opportunity is still limited and prejudiced by poor quality of published industry fund statistics Real performance of European VC already on a rise EARLYBIRD I 3 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • EUROPE HAS A VERY COMPETITIVE POSITION IN TECHNOLOGIESShare of Regions in Triadic Patent FamiliesIn Percent Other 12.2 USA 30.5 Europe 28.2 29 JapanSource: OECD Patent Database, June 2008 EARLYBIRD I 4 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • IN FACT, EUROPE IS THE HOME OF 6 OF TOP 10 MOST INNOVATIVE COUNTRIESGlobal Innovation Index (GII)Innovation Inputs Innovation Outputs Global Innovation Index:Institutions & policies, Human capacity, Knowledge, Competitiveness, Overall RankingsInfrastructure, Market sophistication, WealthBusiness sophistication Denmark 5.73 US 4.84 US 5.28 US 5.72 Germany 4.54 Germany 4.99 Sweden 5.64 Japan 4.12 Sweden 4.84 UK 5.60 Sweden 4.05 UK 4.82 Singapore 5.60 UK 4.04 Singapore 4.81 Switzerland 5.59 Singpore 4.02 Korea, South 4.73 Canada 5.48 Korea, South 4.01 Switzerland 4.73Korea, South 5.45 Netherlands 3.96 Denmark 4.69 Hong Kong 5.45 Luxembourg 3.89 Japan 4.65 Germany 5.45 Norway 3.89 Netherlands 4.64 OECD-EU 5.00 OECD-EU 3.67 OECD-EU 4.34 World 3.66 World 2.65 World 3.14Source: INSEAD, The Global Innovations, Rankings and Report 2008-2009 EARLYBIRD I 5 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • SHARP CONSOLIDATION OF THE VC-INDUSTRY IN EUROPE AND EVEN MORE SO INGERMANY DURING THE LAST DECADE...Number of Active* VC Funds – 2009 vs. 1999 USA -15% Only 5 200 independent funds with critical size > € 100M (for comparison: In the US >300 funds!) Europe -57% -85%Germany -85% 30 1999 2009 * All VC funds, doing ≥ 4 investments per year Sub-set of so-called "Investment Grade Funds": US$ 100M; > 50% non-captive capital; raised successor fund with vintage year ≥ 2006Remark: In the US market publication requirements of endowments force essentially all GPs to publish financial performanceSource: NVCA; EVCA; Earlybird Estimates EARLYBIRD I 6 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • … WHILE THE ENTREPRENEUR POOL HAS GROWN…Latent Entrepreneurs in Population between 18 and 64* Europe USA 10.0% 7.4% 7.0% 5.2% 2006 2009 2006 2009 * Not yet involved in entrepreneurial activities, definitions slightly changed from 2006 to 2009Source: Global Entrepreneurship Report 2006/2009 EARLYBIRD I 7 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • … WITH MORE EXPERIENCED MANAGEMENT TEAMSEarlybird Funds – No. of Portfolio Companies w/ Repeat Entrepreneurs EXAMPLE 100% w/o repeat entrepreneurs w/ repeat entrepreneurs 53% 93% 92% 47% 7% 8% 1998 2000 2007 Fund Fund FundSource: Earlybird Analysis EARLYBIRD I 8 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • HOWEVER, THE COMPETITIVE POOL OF INNOVATION MEETS VERY LOW LEVEL OF VENTURE CAPITAL INVESTMENTS IN EUROPE Early Stage Investments in Proportion to GDP (2008) Percent US 0.123 Sweden 0.059 Netherlands 0.043 Finland 0.042 Norway 0.038 UK 0.033 Portugal 0.031 ~ 6x Denmark 0.030 Switzerland 0.027 Romania 0.024 France 0.023 Ireland 0.021 Europe 0.021 Belgium 0.019 Germany 0.018 Spain 0.011 Austria 0.011 Greece 0.006 Poland 0.005 Hungary 0.002 Italy 0.002Czech Republic 0.000 Source: EU: EVCA Yearbook 09, Eurostat, USA: NVCA Yearbook 09, IMF EARLYBIRD I 9 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • IN SUMMARY: COMPARABLE TECHNOLOGY AND MANAGEMENT POOL SERVED WITH ONLYA FRACTION OF VENTURE CAPITAL IN EUROPEAvailability of Ingredients for Innovation-Based Entrepreneurship – USA vs. Europe USA Europe 100% 15,942Innovation* 14,795 X1.1 7.0 X0.9Management** 7.4 0.123Capital*** 0.021 X5.9 * Exemplified by number of Triadic patent families 2006, OECO Fact book 2009 ** Entrepreneurial intentions, no. of people (aged 18-64) not yet involved in entrepreneurial activity per 100 individuals, 2009 *** Invested early-stage venture capital as percentage of GDP, DE in comparison to the US, 2008Source: NVCA, EVCA, OECD, World Bank, Eurostat Global Entrepreneurship Monitor Report 2006 EARLYBIRD I 10 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • ONLY A FRACTION OF STARTUPS RECEIVE FUNDING IN EUROPENumber of Midstage (>$ 5M) VC Deals – USA and Europe USA Europe 1,598 1,430 1,464 1,328 1,345 1,169 1,146 1,092 304 261 232 244 245 221 192 191 2003 2004 2005 2006 2007 2008 2009 2010Source: EVCA, Venturesource EARLYBIRD I 11 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • MANY TECHNOLOGIES AND PATENTS REMAIN UNUSED FOR STARTUPSShare of Patents Used to Start a New CompanyIn Percent 7.8% 5.1% 3.8% 2.7% USA EU Japan GermanySource: PatVal-EU servey 2007 EARLYBIRD I 12 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • THIS MARKET IMBALANCE LEADS TO SIGNIFICANT EUROPEAN ADVANTAGES IN ENTRYVALUATIONS, CAPITAL EFFICIENCY AND HIT RATEBenchmarking of VC Performance Drivers, Europe vs. USA, 2004-2010 ytd USA Europe USA = 100%Significantly Lower Average EntryEntry Valuations Valuation* $ 5.5M $ 16.1Mand AverageLower Capital Invested $ 44M $ 79MCapital Intensity Prior to Exitbut onlySlightly Lower Average Exit $ 304M $ 388MExit Valuations Valuation * Average median pre-money valuations of the years 2004-2010 ytdSource: EVCA, Earlybird analysis EARLYBIRD I 13 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • SUMMARY Imbalance of supply and demand for venture financing has created a very favourable investment environment Visibility on the current opportunity is still limited and prejudiced by poor quality of published industry fund statistics Real performance of European VC already on a rise EARLYBIRD I 14 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • PUBLISHED INDUSTRY DATA FOR EUROPEAN VC MISLEADING Reported performance of post-bubble vintages still open − High share of still private portfolio companies − Especially well performing companies remain in the VC portfolio during challenging capital markets at rather low book values Published industry data not credible − Sample for official industry stats way too small: industry performance data based on just roughly 15% of all funds − European performance not comparable and with negative bias because of overweighing small funds as well as funds without going concernSource: Earlybird EARLYBIRD I 15 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • THEREFORE: PERFORMANCE OF THE POST BUBBLE VINTAGES NOT YET VISIBLEAssembly of NAV, European Venture Funds by VintagePercent 100%Unrealized 7 22 It takes 6-7 years 36 to display the performance 50 52 of a venture fund 65 75* 84 96 100 100 100 100Realized 93 78 64 50 48 35 25 16 4 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 * Est., data not availableSource: Cambridge Associates: Global VC & PE Index and Benchmark Statistics 2009 EARLYBIRD I 16 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • ESPECIALLY SMALL FUNDS UNDERPERFORM THE INDUSTRYFund Size$ millions18%16%14%  Concave relationship between IRR and fund size12%  Fund size is measured as10% capital committed at closing  Regression results control for8% vintage year, fund category6%4%2%0% 10 20 50 100 200 500 1,000 2,000 5,000Source: Lerner, Leamon and Hardymon [2011] EARLYBIRD I 17 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • EUROPEAN INDUSTRY STATISTICS REVEAL A SMALL-FUND-BIAS AS OPPOSEDTO THE USThomson Reuter (and EVCA) Data Base, Structure of Contained VC-Funds 1996 - 2008 InvestmentPercent grade sizes Europe: 100% = 589 Funds USA: 100% = 605 Funds US$ 1,000m+ 0.3 4.2US$ 500m - 1,000m 1.5 22.6% or 12.4 73.4% or 137 funds 432 funds over 13 over 13 US$ 250m - 500m 5.6 vintages 25.1 vintages US$ 100m - 250m 15.2 31.6 US$ 50m - 100m 19.3 11.9 US$ 25m - 50m 21.5 7.5 US$ 0m - 25m 36.5 7.3Source: Thomson Reuter, Earlybird Analysis EARLYBIRD I 18 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • OFFICIAL STATISTICS FOR EUROPEAN VC NOT REPRESENTATIVE Post-bubble industry consolidation of European VC industry ~ 1,600  65% of EVCA listed funds have disappeared since the burst of the bubble  Only 30% of the remaining funds considered active by EVCA*  Only moderate industry consolidation in the US during the same -57% time frame Negative bias of industry-leading Thomson Venture database 711  Most likely, large part of the contained fund managers are not going concern, i.e. have not raised funds since 2005  Many of the top-performing funds are not publishing their financial data in Thomson database (e.g. Accel; Draper; Balderton; Healthcap; Index)  As a result, Thomson Venture database largely refers to non- contributing long tail of European VCs 1999 2009 * Doing ≥ 4 investments per year Remark: in the US market publication requirements of endowments force essentially all GPs to publish financial performanceSource: EVCA, Earlybird Analysis EARLYBIRD I 19 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • SUMMARY Imbalance of supply and demand for venture financing has created a very favourable investment environment Visibility on the current opportunity is still limited and prejudiced by poor quality of published industry fund statistics Real performance of European VC already on a rise EARLYBIRD I 20 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • INDEPENDENT DATA BASES PROVIDE EVIDENCE FOR RISING PERFORMANCE OF EUROPEANVENTURE ON INDIVIDUAL DEAL LEVEL…CEPRES, Investments Made 2002 - 2009, Mean USA Europe 3.14x 17.1% Other data bases pointing in the same direction are  Dow Jones VentureSource  Adams Street Partners 7.5% 1.32x 1.35x 0.43x IRR TVPI DPISource: CEPRES EARLYBIRD I 21 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010
  • OUTPERFORMANCE BASED ON OVERPROPORTIONAL SHARE IN SUCCESSFUL EXITSIN RECENT YEARSOverview US- vs. European Share in VC Value Contribution, 2004 - 2008Percent 100%Europe 18 22 36 41USA 82 78 64 59 Total capital No. of exits No. of Home Runs: Total no. invested > US$ 100m 10x cap vs. Invested of exitsSource: Dow Jones VentureSource EARLYBIRD I 22 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010