Declining activity belies venture successes

The slump in venture activity has been noted in all regions in 2011, according to unquote" data, and was particularly marked in the second half of the year. Preliminary data from EVCA corroborates this finding, as well as some stage differentials: seed capital was negligible while later stage venture declined most significantly.

On a more positive note, the size of average investment continued to increase from its 2009 trough, as steady deal volume saw decreasing deal value. Good news was also reported on the fundraising front over the past year, with close to €3bn added to venture capitalists' war chests, an increase by 36% according to EVCA data. Although based on a small number of final closings, the average fund size nearly doubled to €80m since 2010 as only 37 funds captured the money. This could mean substantially more firepower for VCs.

Index Ventures' latest €150m fund close illustrates the success some fund managers are having - the vehicle was closed in just four months' time. However, this is unusual, with most funds (venture and buyout alike) taking much longer. Venture, for example, is taking on average 17 months to close, according to EVCA data.

LPs are attracted by exits. While they have continued to decline in 2011, trade sales were up and write-offs declined. IPOs rebounded as well, as illustrated by Sofinnova's DBV Technologies flotation, raising €40.5m. It remains to be seen, however, whether this helps confirm the rise of IPOs seen on the overall market and boost the historically poor and negative returns of venture, which have been negative (average) since 2002.

Another striking feature observed in our 2011 statistics was the continued rise of both government agencies and corporate investors in venture capital. Their increased presence has been crucial as banks and insurance companies wane in the LP roster owing to regulation as well as insufficient distributions.

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• Topics
• Venture
• Fundraising
• Venture
• Index Ventures
• Sofinnova
• Market Insight