VC players are operating in a market characterised by uncertainty. This is the main conclusion at the closing of the EVCA technology investment conference, held in Barcelona last month. “It is not the clear what the right steps are and who the winners are of the future,” said Max Burger-Calderon, EVCA chairman.
It’s a case of standing by your portfolio companies and supporting them where necessary. Longer investment horizons are re-emphasising the importance of high quality management in creating sustainable business models.
Times are still tough and exit markets are challenging. Chairman of the day Daniel Muzyka said: “It is the best of times, it is the worst of times. It is a time shaped by negative news the dot.com evaporation, stock market downturn, exit markets under pressure and LPs becoming more aggressive in terms of accountability.” On the positive side, he says we are also seeing an increasing support for venture capital for example CalPERS has recently boosted its allotment to venture capital.
One thing is certain, the VC is certainly being challenged in terms of creativity. Thomas Kuhr of T-Venture speaking in a session on Creative Alternatives to IPOs said: “The IPO market will not be open at least for the next two years, so we need some good alternatives and also good advice on how to manage our funds.”
So the IPO market is showing no signs of immediate recovery and in the meantime VCs need to extend the financing of existing investments and seek alternative exit routes. Among those mentioned were the usual suspects such as trade sale, secondaries and the involuntary exit the write-off. Less conventional are the reverse takeover and the sale of future royalty streams.
Summing up, Muzyha concludes: “Opportunity abounds, but our expectations just have to live long enough to realise it. The glass may be half empty compared to previous years simply because the glass is growing and there are more opportunities out there.” The challenge is to be bold, to be ambitious, he says. It is the most committed who will win.