1. Definition of Venture Capital;
2. Corporate structure and operation;
3. Main European players and relationship with EU
4. New sector of investment and conclusions
It’s a private funding used to support risky new
business and speculative ventures, usually with high
A typical venture capital investment usually involves
the business owner giving up equity to venture
capitalist in return for funding.
Venture Capitalists and
Venture Capitalists are investment firms that
makes venture investment, providing capital for start-
up or expansion.
They are looking for higher rate of return, bringing
their managerial abilities to small businesses with
great potential growth.
Business Angels are private investor with huge
personal capital, looking forward to invest their
money in business which are not helped by financial
institutions because are too risky.
Venture Capital Firms
Venture capital firms are typically structured as
This comprises both high net worth individuals and
institutions with large amounts of available capital, such
as state and private pension funds, university financial
endowments, foundations, insurance companies, and
pooled investment vehicles, called fund of funds or
VC firms in the United States may also be structured as
limited liability companies, in which case the firm's
managers are known as managing members.
Venture capital funding
Venture capitalists are typically very selective in deciding
what to invest in;
Funds are most interested in ventures with exceptionally
high growth potential,providing the financial returns and
successful exit event within the required timeframe
(typically 3–7 years) that venture capitalists expect.
Young companies to raise venture capital require a
combination of innovative technology, potential for rapid
growth, a well-developed business model, and an
impressive management team.
According to the development of the company, there
are three types of financing with venture capital:
2.Expansion and development
3.Acquisitions and restructuring
To analyze these points, they can be divided in several
subgroups in order to stress the fact that every step
in a company lifetime involves a different approach
by venture capitalists.
Venture Capital Investment in
Europe : differences between
Germany and United Kingdom
These two countries are very important in Europe:
they account for over 50% of all venture capital
investments in the Continent.
The spread of two countries is due to, most of all,
the difference in their financial system:
Germany is Bank-oriented while
UK is Market-oriented.
Similarities between Germany
and The United Kingdom
In both countries venture capital funds provide
funding to companies in all stages with a sligh bias
towards later stages of development.
Also the distribution of investments across industry
is surprising similar: manifacturing and chemicals are
relatively more popular.
European Institutions and venture
• 1998: The Commission published several
documents in order to create a “Pan-European
Equity Market” for innovative companies.
• In the same year was created the EVCA (European
Venture Capital Association) tend to focus on the
supply of funds and on the creation of favorable
structural conditions for enterpreneurship.
Eurpean Venture Capital
It is the largest private equity and venture capital
member association in the world, with over than
It caters for: investors in university spins-out;
venture and grown capitalists;
corporate venture capital
mid-markets and larger buyout
miriad advisory members. 12
The European Investment Fund
In 2000, the Commission restructured the EIF (Euopean
Investment Found) that provides portfolio guarantees to
financial insitutions involved in SME finance.
The EIF offers:
Competitiveness and Innovation Framework Programme (CIP):
this programme aims to facilitate access to loans and equity
finance for small-medium enterprises where market gaps have
• Risk capital for innovative SMEs in their early stage:
EIF can invest 10 to 25% of the total equity of the intermediary
venture capital funds, or up to 50% in specific cases;
• Risk capital for SMEs with high growth potential in their
espansion phase: EIF can invest 7.5 to 15% of the total equity
of the intermediary venture capital funds, or exceptionally up to
Programming Period 2007-
New Sectors of Investment
United Kingdom 5.79%
Wind Energy 46.35%
an opportunity to catch for
Venture capitals put their eyes on renewvables
They sat special teams or branches to focus better
on this special kind of investment;
U.S and Europe kept investing a lot over the years
on this new market in order to find new sources of
opportunity to catch for the
Three reasons of attractiveness :
1. Governments keep increasing deregulation of the
2. Enviromentalists put the attenction on the need of
the world of new sources of energies;
3. Increasing costs of the oils.
• Venture capital energy companies invest on projects
long the value chain,focusing on two directions:
1.Increasing efficiency of the energetic system;
1.Decreasing the use of fossil fuel put down the values
of the pollutions.
In recent years
2006:venture capital invested $7.4 billion on
renewvables energies winth an increasing of 146%
respect the last year;
2008:in the last mounths of the year a drop in the
2009/2010:investments increase again supported by
the developing countries (China)and U.S.
Sectors of investment
Solar and geothermal energies represent two fixed
points for investments;
By the way, in recent years wind energy became the
top ranking, achieving the status of most actractive
technology among renewvables energies.
What happens in Europe?
Europe is one of main area where the VC
investments on renewvables energies sat;
Europe represents the 30% of total investments in
the world, concerning this sector;
Large stage Early stage Borning stage
65% 20% 15%
From the previous table we noticed that venture
capitals prefer to acquire energy companies that
already own high skills;
This tendency is becaming quite the opposite in this
last years because of the improving of new
technologies that allow to manage better the risk of