EntrepreneursEspritVenice Project

Euro venture returns to lead the asset class?

By January 17, 2007 2 Comments

According to data just out from the European Venture Capital Association Euro venture returns are looking like they might soon be category leading.  By Euro I mean UK and Europe. 

I posted back in October about how European Venture is starting to hold its own.  In that post I cited a Silicon Valley Bank study which showed that our top funds are doing as well as top US funds and that in Europe we have had more than our fair share of 10x exits.  This information warranted a post because for years European venture results have trailed US venture results.

Similarly European venture results have trailed European buyout results – but I made the point that the winds of change were blowing our way – the mid market buyout market has already passed its peak and the big ticket LBO market is looking decidedly toppy.

The new data from EVCA shows that European venture may already be the best performing category:

  • The rolling one year IRR for 2005 (latest year available) was 36.5% for venture and 31.7% for buyouts.
  • Since 2000 Euro venture returns have been better than US venture – (IRR of minus 3.0% versus minus 6.7%.

I have only cited one year rolling IRR figures, and obviously it is fund returns over 5-10 years that will count in the end, but the big picture trends are coming our way.  I would also argue that it is difficult to draw conclusions looking back over the last 5-10 years. European venture capital is still a young industry – we only really got going in the late nineties and since then we have had one crazy bubble, one huge tech recession and only now are we in a period of relative normality. 

The other obvious point is that even though our returns since 2000 are better than our American cousins, they are still negative.  I think that will change though.  The high positive rolling one-year IRR figure augurs well and when I look at our own fund here at Esprit and those funds where I have friends and know how they are getting on, I am confident that the current vintages will do well.  It is simply a great time to be building and investing in European companies.

Also interesting is that the best returns come from larger funds – €500m-1bn for buyouts and €100-250m for venture.