Nery Alaev

Complex picture for Venture Capital in Europe

Several different economic factors in Europe, including weak GDP growth and high prices for deals, have affected the climate for private equity investment and venture capital across the continent, according to an article published by Value Walk.

I’ve decided to look into the details of the article, including the differences in results between venture capital and private equity buyouts.

Price shifts

When observing private equity deal flow by both year and quarter, 2014 will probably remain a high-water mark for private investment in Europe.

In terms of capital invested by both buyout and venture capital firms, persistently high asset prices have kept levels elevated in recent years with the aforementioned peak in 2014. The slide in overall private investment count is also an important indication of current trends. Nery Alaev

Heightened valuations have effected activity, despite their limited effect on overall value.

The central point is the extent that activity will fall, as well as what will happen when overall value inevitably declines.

External factors

Regulations are still a deterrent to the riskier forms of lending, however interest rates could drop further. Also, European lending markets are not as varied or broad as those in the USA, meaning the availability of financing from alternate lenders in the case of buyouts is reduced.

As for the regional differences between private equity and venture capital, there are clear disparities.

For example, private equity is affected by a strong supply of businesses ripe for buyout and investment on a sector-by-sector and region-by-region basis, where venture capital is affected by government stimulus.

Nery Alaev

Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria