Podcast
Questions and Answers
What is the primary reason for the decline in VC investments?
What is the primary reason for the decline in VC investments?
- Decrease in startup cities
- Slow technology advancements
- Inflation and rising interest rates (correct)
- Lack of creative minds
What is the current trend in the venture capital cycle?
What is the current trend in the venture capital cycle?
- Stable cycle
- Downturn cycle (correct)
- IPO cycle
- Upturn cycle
What is the primary challenge in driving innovation?
What is the primary challenge in driving innovation?
- Slow technology advancements
- Lack of creative minds (correct)
- Financial crisis
- Decrease in startup cities
According to the provided information, which of these factors is NOT a trend fueling the boom of the European Venture Capital industry?
According to the provided information, which of these factors is NOT a trend fueling the boom of the European Venture Capital industry?
What is the relationship between the 'cost of experimentation' and the adoption of new technologies, as illustrated in the provided content?
What is the relationship between the 'cost of experimentation' and the adoption of new technologies, as illustrated in the provided content?
Which of these statements accurately describes the relationship between European and US VC returns, as depicted in the data?
Which of these statements accurately describes the relationship between European and US VC returns, as depicted in the data?
Based on the data provided, which European country has the largest startup ecosystem, as measured by the total value of startups compared to GDP?
Based on the data provided, which European country has the largest startup ecosystem, as measured by the total value of startups compared to GDP?
What is the primary conclusion drawn from the analysis of revenue multiple valuations for software companies in Europe and the US?
What is the primary conclusion drawn from the analysis of revenue multiple valuations for software companies in Europe and the US?
According to the content, what is the impact of AI on the venture capital cycle?
According to the content, what is the impact of AI on the venture capital cycle?
How has the evolution of work, teams, and networks affected the European VC landscape?
How has the evolution of work, teams, and networks affected the European VC landscape?
According to the data, what is the trend observed in the number of European cities with unicorns over the past 10 years?
According to the data, what is the trend observed in the number of European cities with unicorns over the past 10 years?
What is the primary reason for the increased share of US funds in EU venture investments over the past decade?
What is the primary reason for the increased share of US funds in EU venture investments over the past decade?
What is the typical duration of a VC-cycle following public markets?
What is the typical duration of a VC-cycle following public markets?
In the recovery phase after the financial crisis, which value is expected to be high?
In the recovery phase after the financial crisis, which value is expected to be high?
What trend is expected for private market valuations leading into the next phase?
What trend is expected for private market valuations leading into the next phase?
What does 'VC dry powder' refer to in the context of venture capital?
What does 'VC dry powder' refer to in the context of venture capital?
In terms of the venture capital cycle, what is expected during the years 2023-2024?
In terms of the venture capital cycle, what is expected during the years 2023-2024?
What is implied about number of exits/distributions in 2024?
What is implied about number of exits/distributions in 2024?
Which statement accurately describes the public market valuations during the anticipated recovery period?
Which statement accurately describes the public market valuations during the anticipated recovery period?
Which of the following is a characteristic of the venture capital environment in 2022?
Which of the following is a characteristic of the venture capital environment in 2022?
What impact did the financial crisis in 2008 have on early-stage venture capital valuations?
What impact did the financial crisis in 2008 have on early-stage venture capital valuations?
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Study Notes
Venture Capital Cycle and Financial Crisis
- The VC cycle follows public markets and typically takes around 3 years.
- During the 2008/09 financial crisis, US VC valuations dropped by around 39%, and NASDAQ Index declined by approximately 36%.
- Pre-money valuations and NASDAQ Index medians were used to analyze the impact of the financial crisis on US VC valuations.
Recovery of Venture Capital Valuations
- The recovery of venture capital valuations is foreseeable in the next phase.
- The current environment is characterized by declining public market, high private market, and declining investment/fundraising.
- Intrinsic value creation through innovation and new technologies is expected to drive the recovery.
Investment Opportunities
- Now is the time to invest, as the recovery of venture capital valuations is expected to unfold.
- Impressive scalability for online businesses driven by technology advancements, with companies like Netflix, Twitter, and Facebook achieving rapid growth.
Bottleneck for Creative Minds
- The democratization of innovation is driving the need for creative minds, with the number of developers on GitHub increasing to 56m.
- R&D staff in MSCI world tech companies stands at 1.9m, highlighting the bottleneck for creative minds.
Virtualisation of Eco-Systems
- Virtualisation of eco-systems is empowering non-urban regions, with the number of European cities with at least one unicorn increasing to 65.
Decline in VC Investments
- There has been a significant decline in VC investments due to inflation and rising interest rates, with European VC investments declining to €61.3 billion in 2022.
- The decline in VC investments has created a strong buyer market, with estimated venture capital demanded to supplied multiple at 2.4x.
Market Shift
- The market shift has translated into a downturn cycle starting in November 2021, with the Thomson Reuters (Refinitiv) Venture Capital Research Index declining by 50%.
- The special opportunity in European deep tech is emerging as the orphan child of VC.
European Tech VC Performance
- European Tech VC has been one of the best-performing asset classes in terms of returns, with a 10-year horizon pooled return (net) of 27.5% as of Dec 2022.
- European Tech VC has outperformed the MSCI Europe Index and US VC Index.
Conservative Tech Valuations in Europe
- Tech valuations in Europe are more conservative than in the USA, with revenue multiple valuations for SW companies in Europe at 5.5x compared to 9.9x in the USA.
German Startup Eco-System
- The German Startup Eco-System is still way behind, with the total value of startups as a percentage of GDP at 4.7% compared to 16.0% in the USA and 13.5% in the UK.
Trends in European Venture Capital Industry
- 4 trends are fueling the boom of the European Venture Capital Industry: acceleration of platform technologies, increasing scalability of new businesses, activation of non-urban regions, and mature VC markets pushing to Europe.
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