EMEA-Based Institutional Investors Seeking Investment in Venture Capital - April 2016

by Justin Beardon

  • 27 Apr 2016
  • PE
  • VC

According to the 2016 Preqin Global Private Equity & Venture Capital Report, appetite for venture capital has risen among investors over the last year: 24% of respondents believe venture capital will present the best opportunities in 2016 – a significant increase from 14% in 2015. Preqin’s Private Equity Online currently tracks 902 EMEA-based institutional investors that have a preference for venture capital funds. These LPs account for over €26tn in assets under management (AUM), and represent more than a quarter of all investors with appetite for venture capital vehicles globally.

As shown in the chart above, pension funds make up the largest proportion of active EMEA-based investors targeting venture capital funds in the next 12 months; private sector pension funds and public pension funds represent 17% and 15% of the investor population, respectively. A notable example of a recent investment by an EMEA-based public pension fund in a venture capital vehicle is AP-Fonden 6’s commitment to Creandum IV, which focuses on early stage investment and backing outstanding entrepreneurs in the Nordic region.

Interestingly, a relatively large proportion of government agencies will be active in venture capital over the next year, including Oslo-based Norfund, which plans to invest in early stage venture capital funds seeking exposure to emerging markets, with a primary focus on Africa.

Sixty-two percent of active EMEA-based investors with a preference for venture capital are located in West Europe, with UK- and Germany-based investors representing 20% and 16% of the active investor population respectively. This group includes the European Bank for Reconstruction and Development (EBRD), which intends to invest in 7-10 buyout, venture capital and mezzanine funds in the next year, targeting funds focused on former countries of the Soviet Union, Eastern Europe, the CIS and North Africa. Nordic-based investors make up the next largest proportion (16%) of active EMEA-based venture capital investors, while Israel- , Central & Eastern Europe- and Sub-Saharan Africa-based investors each represent 6% of the investor pool.

EMEA-based venture capital investors also have a clear preference for investment in Europe, with over 63% targeting the region in the next 12 months, as compared to 40% targeting North America and 17% targeting Asia. However, a significant proportion of EMEA-based venture capital investors will seek new venture capital funds globally in 2016, with just under 45% intending to invest with a global mandate. Poalim Capital Markets, the Israel-based investment bank, maintains a primary preference for domestic-focused funds, including venture capital, although it will target investment on a global scale in the next year.

In terms of stage preferences, nearly all (98%) of active EMEA-based venture capital investors will target generalist venture capital funds in the next 12 months, although 66% and 64% are targeting funds focused on  making seed investments and financing start-ups respectively. Latvian Guarantee Agency is one of the investors planning to commit exclusively to early stage venture capital funds in the next 12 months. The government agency plans to commit €80mn to four vehicles that target early stage financings in Latvia.

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