European VC — Ugly duckling or beautiful swan?
EIF speakers and industry practitioners at the recent UGLY DUCK conference delivered insightful and thought provoking views on European VC as an the asset class.
Reviewing the past, present and potential future of this market, many of them suggested that European VC is no longer an ugly duckling but rather an investible swan with an impressive array of unicorns.
Does this mean the EIF has accomplished its mission? We can be proud of what we have achieved to date but there is no doubt that a lot of work is still to be done — particularly in certain areas. Public investment is needed to further develop the breadth and depth of the market and the EIF will continue to build tailored solutions to tackle these gaps.
So let’s take a closer look at the EIF’s five key take-aways from this event.
- Betting on the winners makes a difference
An analysis of the EIF’s portfolio of VC funds unveils some interesting facts about Europe’s double-digit VC performance. For example, life sciences funds are able to deliver risk commensurate returns in line with, and in some cases, outpacing ICT. What’s more, investors should not fear emerging teams. In fact, they claim at least a 35% share of the top 5, 10 and 20 best performing funds. How has all of this been possible? The EIF’s analysis shows that, since 2006, European VCs have been more actively betting on the winners in their portfolios- a trend we believe will continue.
2. Where are we in the cycle?
European VC has grown from a handful of funds twenty years ago to a well-established ecosystem. A more conscious approach to managing the value drivers in VC portfolios has led to an increase in home runs and impressive results. However, the EIF’s analysis also shows there are signs that the market is pricing in this positive trend and the challenge is to focus on the substance of value proposition in business models rather than being distracted by an increasingly heated market environment.
3. There’s more to be done
There are still gaps in the VC landscape including Eastern Europe and parts of Southern Europe. The EIF will continue to work with policy makers to tailor our approach to specific market conditions to address market failures, pre-empting them whenever possible and quickly reacting when not. There are still significant hurdles at the sector level, such as how to ensure European life sciences companies have access to scale up financing in Europe — Antoine Papiernik co-founder of Sofinnova Partners is tackling this head on and developing solutions in Europe that work with, not against, the NASDAQ.
4. Disruption is all around us
Some GPs out there including Tal Elyashiv from SPiCE VC are looking at ways to disrupt VC fundraising by providing institutional investors liquid access to the market through the use of security tokens. Tal put forward the thesis that buying security tokens (or digitised securities) allows eligible investors to trade in and out of an investment while remaining within securities legislation. Dr Omar Hatemleh from the NASA International Space University believes that the world in which we live will be radically different 10 years from today thanks to significant research and development in fields like of AI, robotics, big data or quantum computing, unlocking more opportunities for entrepreneurs and the VCs that support them.
5. European VC — food for thought
Mor Assia, i-Angels, entrepreneur and angels investor, reminded the audience of the need to adapt to the new breed of millennial entrepreneurs, sharing that some VCs are already changing their partnership structures to accommodate younger partners who relate to this increasingly important segment of the market –as socially aware entrepreneurs, employees and consumers. According to data shared by Sofia Hmich, co-founder of Future Positive Capital, more than 75% of tech exits in 2016 were non-VC backed — a trend that has been increasing since 2014. Sofia argues that VCs are currently missing investment opportunities in overlooked sectors with big societal demands such as energy, health lifestyle, food waste and circular manufacturing to name a few.
We were delighted to welcome over 250 GPs at UGLY DUCK 2018, the EIF’s inaugural VC conference in a new format, to share insights, host a great line-up of speakers and spend an afternoon networking and discussing the latest developments in our industry. In parallel, dedicated events also took place for institutional investors and business angels. Thank you to everyone who joined us and see you again next year at UGLY DUCK 2019! #UGLYDUCK18
Watch the Ugly Duck film on the EIF’s YouTube channel: https://www.youtube.com/watch?v=EX1f4JKEaeI