German venture capital firm Holtzbrinck Ventures’ recent successful fundraising at €285m for its sixth fund illustrates a trend we’ve been talking about for some time now – the European venture capital ecosystem is coming of age.
The Holtzbrinck story is a good example of how European venture capital is delivering great results. The firm, which has been investing in the internet, mobile and digital media sector since 2000 raised its latest fund in just four months and was substantially oversubscribed. For context, Holtzbrinck’s last fund, raised in 2012 closed at €175m.
The firm’s fundraising success reflects an encouraging uptick in European venture capital activity over the last year. Our preliminary data suggests that in 2014 many more venture capitalists were fundraising as investors now start to see good returns from venture capital investments.
Indeed, as we highlighted in our Smart Choice report in 2013, many of the investments made over the last few years are now starting to generate great results. Holtzbrinck’s existing portfolio is one example: the firm has invested in over ten companies at seed stage that today generate in excess of €100m in annual revenues and five of these are currently valued at more than €1bn. Our data on exits provides another example. While the number and values of venture capital exits for 2014 are relatively stable compared with 2013, our figures suggest that the number exited via IPO will have increased markedly. This is important as IPOs provide a valuable additional means of realising capital for investors in addition to the more traditional route seen in Europe of selling to corporate buyers.
It’s clear that we are now starting to see a virtuous cycle of Europe’s experienced venture capitalists making investments in some of Europe’s most promising early-stage companies, run by, in many cases, repeat or serial entrepreneurs. This, in turn, is leading to good returns to investors as exit prospects improve for the region’s fast-growing companies, many of which have expanded onto the global stage. The final part of the cycle – increased investor support for European venture capital – is now beginning to emerge. This is good for European venture capital, it’s good for Europe’s new and innovative companies and it’s good for the European economy.