With things seemingly looking up for Europe: bond rates falling off the back of increased consumer confidence and solid retail figures despite the high unemployment rate, how has European venture capital activity fared against the crisis?
The European, along with the global, financial crisis first began in 2007 and Preqin’s Venture Deals Analyst online service shows that 988 deals were made in this year with an aggregate value of €4.3bn. The round that saw the highest number of deals was Series A, with 178 deals made at an aggregate value of €758mn; however, the round that saw the largest aggregate deal size was Series B, €865mn, with just 115 deals. Not surprisingly, there were only 89 angel and seed deals in 2007, at an aggregate value of €52mn, possibly due to the riskier nature of a guaranteed return on investment perhaps explaining the large numbers in more certain rounds (Series A and B).
2010 and 2011 went on to become the most crippling years of the European financial crisis. Preqin’s data, however, shows that in 2010, despite the 8% drop in aggregate value compared to the start of the crisis, there was an 11% increase in the number of deals in the same time period. In 2011, the number of venture capital financings in Europe decreased slightly compared to the previous year, yet the aggregate value of venture capital financings increased by 7% on the 2010 figure and nearly matched the aggregate value of European venture capital financings in 2007.
Further analysis reveals that the largest number of deals in 2010 was growth capital/expansion investments, 201, at an aggregate value of €852mn. In contrast, 2007 showed 40 such deals at an aggregate value of €230mn. The reason for such a large increase in growth capital activity could be linked with investors looking to bolster their earlier investments amid the rumoured and actioned government bail-outs happening in Europe in 2010.