Since its early days, the European venture capital market has been the middle child that never quite lived up to expectations. It never compared to its forerunner, the US venture market, and never had the buzz that the opportunities in China and India are generating today. But Neil Rimer, a general partner at the Geneva-based Index Ventures, believes European venture may finally be ready to take off.
Rimer cites the growing sophistication of the European institutional market, the expanding number of quality companies and an ever-deepening pool of entrepreneurs. Perhaps most important, he notes that the opportunities for exit are finally beginning to open up, as globalisation isn’t just confined to the aforementioned hot markets in China and India.
“Investors can buy stocks on any exchange in the world and the big acquirers have demonstrated that they’re indifferent to buying a business in any geography, as long as the business is creative and can expand the scope of the [acquiring] company.”
Rimer should know. One of Index Venture’s greatest wins was the sale of Geneva-based VoIP provider Skype to eBay in a $4.1 billion deal that reportedly netted the firm around $300 million in profits.
However, Rimer deflects any applause for the investment, noting, “There really shouldn’t be too much emphasis placed on Skype. It wasn’t the first big deal for Europe and it certainly won’t be the last.”
Confirming this sentiment, Apax Partners recently scored a reported 27x return when it unloaded its stake in German solar cell manufacturer Q-Cells in October, and other firms have also been finding exits through trade sales and the continued emergence of London’s AIM stock exchange.
But Rimer doesn’t see the surfacing of the European venture capital market as any tremendous revelation. He believes that the market was bound to gain its feet given time.
“I don’t really know that it has taken that long for the industry to come around, he says. “There was no real venture industry to speak of until around ten years ago, and a lot has happened during that time. It was basically a standing start for European venture capital, and the last ten years has probably been the most tumultuous period for the industry that has ever been seen. All things considered, I think the market has made remarkable progress over a short period of time.”
Looking ahead, Rimer believes there are some characteristics of the European market that will only serve to benefit venture firms in the years ahead. He cites that companies on the continent have to instil a global mindset straight from the womb, and as globalisation steams ahead, young companies that can conquer Europe, should be prepared to adapt to a cross-continent business plan.
He says, “In the markets we look at in Europe, the companies have to already transcend their borders and linguistic areas to be interesting. There’s a real benefit in that it forces entrepreneurs to think about value propositions and scale.”