TLcom Capital Partners, a London-based venture capital company, has released a study comparing European venture capital exit performance with that of the US. The data shows that the exit performance of IT companies over the last three years in Europe competes in terms of ‘good exits’ with their US counterparts. In fact, the very best European exits are in line with those in the US.
In light of recent successful realisations of European VC-backed companies such as Conergy, Iiiad Groupe, Kelkoo and Skype, the debate regarding the attractiveness of European over US venture capital as an asset class has intensified. Historically the performance of US VCs has been far better than their European counterparts and has received considerably more institutional funds. In the last six years the amount of venture equity invested in the US originated ICT start-ups was approximately US$94bn, whereas the amount invested in Europe was US$20bn.
Traditionally it has been claimed that Europe has had a scarcity of high value exits due to the absence of a suitable IPO market and limited availability of trade buyers. In addition, Europe has also been accused of not having the capability to build European winners through lack of risk and substantial enough investment.
There has been a lot of anecdotal evidence regarding the disparity of exit success in Europe compared to the US. However, TLcom Capital Partners figures show that many of the frequently mentioned causes of poor performance do not add up.
TLcom looked at the last three years, including the opening quarter of this year, and studied over 2,600 exits. The report found that 43% of exits generating a 5x or more return multiple and 51% of exits making a 10x or more return multiple were from European companies. “In both categories EU companies outperform the US when benchmarked against the relative size of VC investments in the two regions, which is equal to 22% EU compared to the US,” says TLcom.