Ever since venture capital appeared in Europe, it has grown in the shadow of its more developed overseas counterpart. Even if Europe has had some success stories in the past few years – just think of Skyscanner, Spotify, Supercell or Zalando – there are much more tech giants in the United States. Nevertheless, President-CEO of DN Capital, one of the best-known venture capital funds, Nenad Marovac thinks that the European venture capital sector has been growing steadily so today „unicorns” are born not only in the Silicon Valley. („Unicorn” is a term coined by Aileen Lee for privately owned start-ups whose estimated worth exceeds USD 1 billion. Lee has chosen this mythical creature to indicate how rare such successful businesses are.)
The European venture capital sector is only half as old as that of the United States, and its capitalization is only a fragment thereof, still it cannot be called immature. A number of managers have already gained experience and managed entire investment cycles all the way through. There are a lot of experienced investors and over 100 start-up accelerators offering seed capital and mentoring.
In 2016 the European venture capital sector collected an all-time record investment capital of EUR 6.4 billion. More than 10 percent of this sum originated from North-American institutional investors who have increased their share in Europe particularly in the past five years. The European venture capital sector’s capacity to attract capital is still lagging behind the American competition greatly, though it is growing steadily.
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In the meantime, real economy has also shown promising signs. The global financial crisis has significantly slowed down Europe’s economic performance but it has regained its momentum by now and its growth rate has already exceeded that of the United States in terms of GDP. Despite Brexit, growth predictions are encouraging: according to forecasts, about two percent annual growth is expected. And Europe wants to spend even more towards boosting growth: The European Commission’s Capital Markets Union action plan considers several forms of capital injection including venture capital: among others they want to create a ‘fund of funds’ of EUR 1.6 billion, which is a venture capital program aimed to make sure that large institutional investors invest even more capital in the market.
Even so, the top 10 companies with the strongest capitalization are still American, such as Apple, Alphabet, Microsoft or Amazon who have also been the biggest success stories of all time in venture capital investment.
Coming next: How can Europe keep pace with them?