Last month, I posted some data from Cambridge Associates which showed European Venture Capital to be one of the worst performing amongst the asset classes they look at.
A few days ago, I heard about Simon Cook’s slides that showed European Ventures were doing at least as well as their US counterparts (exception: Google). I finally managed to have a look at them on the flight to New Delhi yesterday.
Simon has showed a strong set of data and no wonder it has caught the attention of a lot of people looking at European Venture (see e.g. $1bn entry on Fred Destin’s Blog and alarm clock). I particularly liked the last five slides…worth a dekko.
I later sent an email to Simon asking, “Why can’t LPs see the returns yet?”
In his response, Simon gave at least four reasons for why cash returns from European ventures are still elusive:
1. the fragmented nature of stock markets in Europe (particularly for growth stocks; I take it he was referring to AIM, Nuer Markt etc.) and lock-up/ lock-in periods.
2. the (still) small number of VCs (barely 20) who have consistently delivered $100m+ exits (I am happy to say that both Esprit and Amadeus are in this small group)
3. the nascent stage of the market and lack of a comparable run-up to what was witnessed in US leading to 2001
4. lack of enough data (apparently CA’s data on European Ventures is based on less than half a dozen data points) and European conservatism/prudence (re. valuation)
These are valid points and I believe at least part of the reason why European venture is not perceived as a success is because it is not talked about as such (by the practitioners themeselves)…
Simon’s slides go some way in correcting that perception.