The Venture capitalists are there to support entrepreneurs and startups through thick and then, in return for a piece of equity. They vary is focus and the type of funding they do, but in the end they are all connected by the fact that they want to support global development and investment. But, Venture capital is not a long term source of money. It buys a particular amount of stake in the company, helps the company grow and then exits the situation with the help of an investment banker.
Venture capital fills the gap between sources of funds for innovation which usually comes from corporations, government bodies, and the entrepreneur’s friends and family and traditional, lower-cost sources of capital that is available. It will require the venture capital industry to provide a strong return on capital so as to attract private equity funds, good returns for its own participants, and sufficient potential to entrepreneurs to attract ideas that will generate high returns.
The venture capital industry includes, entrepreneurs who need funding, investors who want high returns, investment bankers who need businesses to sell and the venture capitalists who make money for themselves by making market for other three. In reality, venture capital tends to invest in good industries who have high growth potential instead of good people and ideas.
For instance, in 2020, everyone may think that they can attract VC funding with good ideas backed by technology. But the idea will only work if the particular industry is showing significant rise in near future. Therefore, venture capital firms before locking the deal conduct an audit of the startup. All the departments, assets and balance sheets are audited. When the final deal is signed the partnership is not only monetary, it maybe technical or advisory also. Some venture capitalists take active part in the recruitment of management because the management is the most important part of any company.
Venture Capital usually has very large institutions like pension funds, financial firms, university endowments and insurance companies as investors. According to Harvard Business Review, these investors expect a return of investment between 25% to 35% over its lifetime.
More than 80% of the money invested by VCs go into the growing phase of the company’s life cycle. Early stage financing includes three subdivisions: Pre-seed or, Startup, Seed and First Round.
For a typical deal, venture capital fund will invest $3 million in return for a 40% equity ownership in a startup. For financing a startup for one to two years, these venture capitalists expect a ten times capital return in a period of over ten years.
In Europe Q2’20, sectors like video conferencing and healthcare did better than others and saw a surge in demand by investors and companies.
According to Private Equity Insights, exit value in Europe Q2’20 was below expectations at around €2.7 billion, leading to register as the lowest figure since 2012. Exit outlooks could brighten up towards the latter half of 2020 as investor demands peak again as the pandemic gets more in control.
Global VC funding rises over 40% in Q3’20 compared to Q2’20 and funding to startups increased 29% in Europe between Q3’20 and Q2’20, according to PwC and CB Insights’ Q3 2020 MoneyTree report.
These are the Top 10 early stage VC investors of Europe 2020:
1. Global Founders Capital
It is an international, stage agnostic venture fund that empowers talented entrepreneurs from different parts of the globe. Global Founders Capital was founded in 2013 by Oliver Samwer. The firm concentrates on areas within the internet, retail, financial software, media, communication, and information technology sectors.
Location: Berlin, Germany (HQ), Munich Germany, San Francisco United States
Latest fund size: €150M
Investments to date: 398
Unicorns in portfolio: Zalando, HomeAway, Traveloka, Revolut, Away, Canva and Meero
2. Point Nine Capital
It is an early-stage venture capital firm focusing on SaaS and online marketplaces. Point Nine Capital was founded in 2009 by Christoph Janz, Kolja Hebenstreit, Lukasz Gadowski and Pawel Chudzinski.
Location: Berlin, Germany (HQ), Poland
Latest fund size: €100M
Investments to date: 221
Unicorns in portfolio: Revolut, Clio
3. Hoxton Ventures
It is an early-stage European venture capital firm. Hoxton Ventures was founded in 2013 by Hussein Kanji and Rob Kniaz. It focuses on startups that either disrupt already existing industries or innovate entirely new market categories.
Location: London, United Kingdom (HQ)
Latest fund size: $100M
Investments to date: 60
Unicorns in portfolio: Deliveroo, Babylon Health and Darktrace
4. Cherry Ventures
It is a seed and early-stage fund, founded by a team of entrepreneurs with great experience in making fast-scaling technology companies to add value by supporting its venture teams for building successful and sustainable businesses in the long run. Cherry Ventures was founded in 2013 by Christian Meermann, Daniel Glasner and Filip Felician Dames.
Location: Berlin Germany (HQ)
Latest fund size: €175M
Investments to date: 117
Unicorns in portfolio: FlixBus, AUTO1 Group
5. ACE & Company
It is an early and late-stage VC firm that specializes in co-investment and direct investment strategies. ACE & Company was founded in 2005 by Adam Said, Christopher Kile and Sherif El Halwagy. Originally it was incubated by a single-family office, but now it works in partnership with many individual investors and leading institutions.
Location: Geneva, Switzerland (HQ), New York, London, and Cairo, and Hong Kong
Latest fund size: $110M
Investments to date: 388
Unicorns in portfolio: Didi, TransferWise, Airbnb, Docker, Fivetran etc.
6. Caixa Capital Risc
It is an institutional investor with references specialised in the early stages of innovative companies in Spain. Caixa Capital Risc was founded in 2004.
Location: Barcelona, Spain (HQ)
Latest fund size: €20M
Investments to date: 305
Unicorns in portfolio: Glovo
7. Venrex
It is an early-stage VC based in London. It was funded by Mark Esiri and Tom Fleming in 2003. Venrex is focused on identifying startups that exhibit high-profit making potential.
Location: London, United Kingdom (HQ)
Latest fund size: $3.5M
Investments to date: 59
Unicorn in portfolio: Revolut
8. Inkef Capital
It is a venture capital firm which backs promising early-stage companies in Europe. Inkef takes pride in long-term investment relations with support through many rounds of funding. It was founded in 2010. It focuses on the early stages of the technology and life science venture sectors.
Location: Amsterdam, Netherlands (HQ)
Latest fund size: €2.6M
Investments to date: 54
Unicorn in portfolio: GitLab and Geophy
9. Creandum
It is a leading European venture capital firm which focuses on innovative and fast-growing technology companies within sectors like consumer, software, and hardware industries. It was founded in 2003 and seeks investments in early-stage and growth-stage companies. Creandum has raised a total fund of € 660M.
Location: Stockholm, Sweden (HQ)
Latest fund size: €265M
Investments to date: 170
Unicorn in portfolio: Spotify and iZettle
10. APX
It is a pre-seed VC and accelerator program for very early-stage startups, which works as a joint venture between Axel Springer and Porsche. It was founded by Henric Hungerhoff and Joerg Rheinboldt in 2018. APX looks for ambitious companies with scalable, digital ideas and global feasibility to support them to become successful.
Location: Berlin, Germany (HQ)
Latest fund size: €1M
Investments to date: 28
Unicorn in portfolio: Fintech unicorn N26
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