Europe ahead of the US and China in attractiveness of investment in Venture Capital
Europe ahead of the US and China in attractiveness of investment in Venture Capital
Four years ago, I travelled to Las Vegas in order to attend the event called Collision. It is similar to the event called Web Summit but from the US and in fact, they are the same organisers. These events are a gateway to discover new technological trends, startups from around the world and the most selected of the world of Venture Capital of North America.
At that time, as a fund manager, I was doing an elevator pitch to the American VCs. I was trying to sell my portfolio and to transfer my vision about how interesting it would be for them to diversify their investment beyond the US. For me, Spain was the door to Europe and at the same time it was the door to Latin America. Very soon, my pitch stopped being shocking to them. The North American funds saw in Europe a small continent, very segmented in countries, with different languages and cultures. They told me that they preferred to spend their energy in entering a big market such as China or India.
Surprisingly, it looks like this vision is changing. According to a study in November 2018 from Invest Europe (body that groups at European level Private Equity and Venture Capital), Europe is more attractive than China and US in terms of investment.
How did this happen? It seems like the investment has an opposite behaviour to society. If nowadays population is divided into Trump and against Trump, into Brexit or against Brexit, it looks like money likes to go down the middle path.
According to this study, Europe is attractive due to the fact that it offers legal security and maintains a regulatory framework, it has access to talent, it has policies that protect the environment and finally, it offers extensive transport infrastructures. In fact, Europe has gained attractiveness with respect to the same study in 2017, although, the investors are more open to invest in the United Kingdom despite the fact that it is leaving the European Union.
Therefore, we started 2019 with good news, now we have to seize the moment, giving entrance to foreign investors that boost maturity in the European Venture Capital sector. It seems that being European and working on long-term policies ultimately gives results.
INVEST EUROPE STUDY
Summary
Global investors consider that Europe has multiple strengths in comparison to US and China and for that reason Europe has turned to be the most attractive investment destination. Europe keeps its leadership in areas such as highly skilled workforce, transport infrastructure and regulatory climate. It has also increased its ratio of innovation and entrepreneurship, its access to global markets, their levels of taxation, and flexibility of work. Its economic growth has improved and it offers higher returns.
Europe is ahead of US and China in their commitment with the environment and sustainability.
The government has a clear role to play in encouraging investment, with regulatory stability and flexibility of importance to the majority of investors.
The sectors in which Europe is more likely to be considered as a global leader are finance & insurance, energy & the environment, and biotech & healthcare.
In terms of Brexit, the investors are still considering investing in the UK and in Europe
Regional Comparisons
- Europe is seen as the strongest performer in an increasing number of areas.
- Europe leads other markets in nearly all areas, particularly in sustainability and the environment, and transport infrastructure.
- However, perceived commitment to sustainability and the environment, political and social stability are lower than 2017.
- Europe is perceived as a leader in more areas than in 2017 by all, and particularly by the USA and China
The Attractiveness of Europe
- Europe rated as above average across most areas in comparison to other investment destinations.
- Availability of high skilled workers remains a strength; labour flexibility and availability of low skilled workers has improved.
- UK investors more likely to rate Europe below average on some scores, with USA next.
- France and Germany more likely to rate Europe well in a number of areas compared to 2017.
- Investors in China are particularly likely to see Europe as a global leader across a number of industries.
- Compared to 2017, investors more likely to say that Europe has become more attractive over the past 5 years.
- Increased innovation is the primary driver of Europe´s attractiveness as influence of Eurozone stability falls
Impact of Brexit
Investors are more positive than in 2017 about investing in the UK post- Brexit, and the majority are more likely to invest
· Investors also more positive than in 2017 towards investing in the EU, with the majority more likely to invest post-Brexit
Policy Priorities
- Lower taxation less of a focus in boosting attractiveness; instead a range of other areas need to be addressed.
- Interest in investment incentives driven by China, while UK investors want greater focus on competition policy.
- The decline in emphasis on lower taxes is most notable France and the USA.
- Investors continue to be optimistic about the future investment environment in Europe, even more so than in 2017.
- Positivity towards the investment environment has increased among Europeans, particularly in Germany.
- German and UK investors more likely to view commitment to sustainability and the environment as important than in 2017.
- Stability of the regulatory environment is important to investors, particularly to those in China.
- All government incentives tested are considered attractive by a majority of investors.
- Government incentives particularly attractive to China; flexible regulation outside finance and tax less attractive to the UK
In collaboration with Amparo Medrano
