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Venture capital struggles for niche amidst financial unrest

1 Dec 2011

Although October is still ahead of the equivalent month last year, this is by a small margin: in short, the softening of the environment that was highlighted in September is continuing in October.

According to Go4Venture’s Monthly European Technology VC Bulletin, given the August crisis and turbulent times at macro level, this is to be expected. How bad and how long are going to be the two questions agitating us for the coming months, until Europe sorts outs its eurozone self-inflicted problem.

It said, “How bad this will turn out to be is anybody’s guess. In the small world of venture financing (c. €5bn a year at European level), the tail effects of changes in market sentiment can have comparably strong effects, either positively or negatively. Clearly the overall crisis of confidence is slowing decisions (and this is increasingly spreading to all economic participants), while the more stringent banking regulatory requirements are cutting off a large source of financing for venture funds which still represent the majority of venture financing.

“Then again, the search for alpha in a world of market risks all around (see the growing Euro government bond crisis – with even Germany failing to place its paper) is bringing technology investment back to the fore.”

The report points to how cleantech is no longer as popular as before, in part due to the long time frames and capital required for scale-up, as well as unreliable subsidy frameworks.

Read full report here.

 

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