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Go4Venture Monthly VC Bulletin - June 200609/08/2006. Source: Go4Venture. 
 June 2006 was again a month of sustained activity with approximately €135m being invested in the European VC sector. This is roughly in line with last year's figure, and is approximately in line with May 2006. On a cumulative basis, the Headline Transaction Index is 20 per cent ahead compared to June last year. So it's hardly a runaway market, simply healthy growth in a sector which is still recovering from the worst downturn in its (short) history.
Then again we are not sure we are comparing like for like, as it is becoming increasingly difficult to define what “technology VC” means. European tech VC's (or rather VC's operating in Europe) are experimenting in new areas of investment, seeking of course higher returns, but also newer, larger areas to invest in. VC's are under the pressure as well from their investors to deliver meaningful returns, not only in terms of RoI but also absolute returns. After all, in the alternative investment class, they are competing with other types of private equity, hedge funds a wide variety of investment strategies. At stake is the future of European VC as an asset class – no less.
In June there were several investments illustrating new trends we see in the VC market:
- VC's are acting on the convergence of content (on the back of media moving to "digital only" platforms), telecom services and IT. Digi TV Plus and Sports Media are good examples (see the attached newsletter).
- VC's exploring technology’s pervasiveness i.e. VC's are investing in sectors leveraging technology where technology can re-invigorate traditional business models (distribution, retailing, financial services, next generation telecom services), but also creating new services not otherwise possible (e.g. online auctions, marketplaces and these days social networking). The investment in Ipnotic Telecom is representative of this trend.
- VCs are also getting into entirely new fields such as alternative energies (Microgeneration offers a world of new opportunities) or environmental technologies (“cleantech”). It is also worth noting the increased interest in medical technology and bioinformatics, two areas of life sciences that traditional VC's believe they understand because they are close enought to traditional "tech" (hardware and software).
- Finally, VCs are increasingly becoming traditional private equity players, with buyout type investments which cover a mix of later stage, public to private and use of leverage. This trend is also partly fed by public markets which have become more demanding, both in terms of the financial performance required of new applicants and the costs and regulation associated with a listing. Another driver is the increasing use of “buy and build” strategies as a way to accelerate revenue growth and generate greater absolute returns. As this type of investments are becoming a feature of the European landscape, we will start tracking them (separately) from next month on. For an example in June, see Springwater Capital acquiring M+W Zander.
We obviously follow these trends with attention and, as we follow our traditional clients, we are increasingly active in all these areas, working on opportunities in digital media, next generation telecom operators, alternative energy and later stage financings.
Click here to view the full report - (pdf 169kb).
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About Go4Venture:
Go4Venture is a London-based independent corporate finance advisory firm focused on providing equity private placement and mergers & acquisition (M&A) services to Europe’s leading technology companies and their investors. Our clients include: Growth companies; VC funds; Buyout funds; and IT corporates. More details can be found at www.go4venture.com
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