MT Survey of Surveys: Venture Capital
The late-90s dot.com glory days of start-ups may be long gone, but VC firms are still funding new businesses on both sides of the pond - to the tune of EUR27bn in Europe alone. David Bain reports.
For most of us, the dot.com boom seems a million years ago, but cast your mind back to that extraordinary period in the history of business. Remember all those hugely trendy firms like boo.com, clickmango and Boxman? Well, apart from the internet - and hopelessly optimistic management - all these firms had one thing in common: venture capital.
Venture capital funds were as much an integral part of the tech boom as the internet. In the first year of the new millennium, private equity investment - venture capital and late-stage investments - swelled to dollars 142.6 billion in the US and Europe (the European figure includes buy-outs). Four years earlier it had been just dollars 18 billion.
In 1999-2000, it was no great shakes to walk into a meeting with a venture capital firm and persuade them to sign a cheque for a couple of million dollars for a crazy business idea - as long as it involved the internet.
Wasn't everyone doing it at the time? Boo.com convinced French VC Europ@Web to do so in 20 minutes (so legend has it), before burning more than pounds 100 million in 18 months.
Yet it has not always been boom and bust for these firms and the companies they have funded. In the US, where the industry is much more mature and ingrained within corporate financing methods, VCs played a crucial role in funding extraordinarily successful hi-tech companies in Silicon Valley.
Iconic firms such as Apple, Cisco and Google relied on seed capital from Sequoia Capital, US Venture Partners and the like. Indeed, Silicon Valley would probably not have existed without VC funds.
It's a measure of the maturity of the US venture capital market that the amount and depth of data on the sector is far more refined than in Europe. Across the Atlantic, the industry has a history of more than 30 years, whereas venture capitalism in Europe - including the UK - got under way in a significant form only in the late 1980s. US data tends to be more transparent, partly because of the clear divide made there between venture capital and private equity. In European data, the distinction is often blurred.
Not surprisingly, one of the best surveys on the main players in venture capital is based just down the road from Silicon Valley, in San Francisco.
VentureOne has been researching the sector since 1986 and opened a London office in 2000 to bring its expertise to Europe. It teams up with Ernst & Young to produce quarterly and annual reports on the sector.
In VentureOne's latest survey on European VCs, which looked at the number of deals done and assets under management in the first half of this year, the biggest player is the 3i Group - one of the few firms with a brand recognised outside its sector.
The London-based 3i has been a dominant player in venture capital and private equity for more than 20 years, where it has been at the top of most league tables. It's big across Europe and the US, but the group works across venture capital as well as private equity, and has investments in public companies. Firms like Quester Capital Management and Advert Venture Partners are known for their VC investments. Like 3i, they have pan-European businesses.
German VC Techno Venture Management gets top billing in the annual Limited Partnership survey, which looks at VC firms from the point of view of the institutions - such as pension funds and banks - that give them money.
The survey is produced by Almedia Capital, a private equity and placement company based in London. Apax Partners, whose chairman Sir Ronald Cohn is one of the founding fathers of the European VC industry, and Paris-based Sofinnova Partners also score well on this list.
Last year in Europe, venture capital and private equity firms raised EUR27 billion to invest in budding new businesses and buyouts, according to the annual survey by the Brussels-based European Private Equity and Venture Capital Association (EVCA). …