European VCs: Time To Catch Up

By Jörg Überla, Guest Author

More than 65O IPOs and the highest number of venture-backed IPOs since 2000. These are not the latest figures for the U.S. market, but the 2006 figures for Europe. What’s more: During the same period, the U.S. have seen just 224 IPOs with a volume of €35 billion, half the number of Europe. Europe is definitely catching up, but why?

Let’s start with the overall economy. In the 4th quarter of 2006, Europe has grown faster than the U.S., the export business is booming and companies are investing at record levels. The latter helps start-ups grow. At the same time, the brighter economic prospects pave the way for entrepreneurs; Europe sees high numbers of newly formed companies.

Since the heydays of the New Economy, the entrepreneurial culture has changed fundamentally. Today, we see a greater number of serial entrepreneurs, an established eco system with lawyers, consultants and designers focusing on the needs of high-tech entrepreneurs, as well as a mature venture capital industry. Yes, our industry has changed, too. After the shake-out at the beginning of the 21st century, a small number of experienced pan-European players are driving the market. These players are ready to finance and aid entrepreneurial talent in building businesses on a global scale. The Skype example has shown what is possible out of Europe.

The overall environment in Europe helps us compete. We see great entrepreneurs and are able to finance them at comparatively low valuations thanks to less competition. These companies benefit from good global economic conditions and have a strong will to take their chance on the global market. And the European exit markets are in a better condition than the markets in the U.S. – a very unique situation in quite a number of years. The IPO of social networking platform XING last December has proven the openness of the European financial markets even for young, venture-backed Web 2.0 companies.

Are there any counter-arguments left? For sure. Europe will need some time before it can establish the depth of entrepreneurial culture like Silicon Valley or Route 128. But the clock has started ticking. And as Europe delivers on its own great success stories in the coming years, this will accelerate the creation of even more entrepreneurial talent. Hence my optimism that Europe is catching up.