Venture capital (VC) activity spiked in Europe during the first half of 2015, with $6.6bn (£4.24bn) having been invested. This puts Europe on pace to surpass 2014 totals by nearly 60 per cent.
Arik Speier, head of technology at KPMG Somekh Chaikin, said: “VCs in Europe are reducing risk by investing at a later stage. In the past they invested in many companies in a wide portfolio and managed their own risk, now they are shifting strategy and investing in fewer companies and more money in each.”
Furthermore, VC-backed companies in the UK raised $1.1bn (£71m) in the second quarter of 2015, taking the total raised so far in 2015 to nearly $2.25bn (£1.45bn). The report also found that the UK accounted for one-third of all venture capital activity in Europe 2015, with key transactions including a $500m (£321.14m) corporate minority investment in London-based OneWeb and a $150m (£96.34m) Series E for Funding Circle.
It was suggested that the second quarter saw a rise in late-stage mega-deals, with the average deal size doubling from $26.3m (£16.89m) in the first quarter 2015 to $52.2m (£33.53m) in the second. Four mega-deals sized $100m (£64.23m) or more contributed to this spike in late-stage deal size, including a $526m (£337.84m) Series G round for digital music service Spotify.
There has been an increase in $100m+ mega-round financings to VC-backed companies. In the first two quarters of 2015, there were more than 100 mega-rounds, including 61 in Q2 that cumulatively raised more than $16bn (£10.28bn) in investment.
Read more on venture capital:
- The European VC investment trends that took place in Q1 2015
- A look at the most active UK equity investors in the seed, venture and growth space during 2014
- North East holds its own in number of private equity and venture capital-backed businesses
Brian Hughes, national partner of KPMG Venture Capital Practice, said: “Low interest rates combined with increasing participation by hedge funds, mutual funds and venture capital arms of large corporations means there is a tremendous availability of capital.”
And Anand Sanwal, CEO of CB Insights, suggested that VC-backed companies are staying private longer, and the best companies have a menagerie of funding options.
“This helped buoy Q2 2015 funding to levels last seen during the dot com era,” Sanwal said. “Notably, the strength was global – from Berlin to Bangalore and the Bay Area to Beijing. While the funding environment is certainly frothy, we are seeing start-ups rapidly re-shape markets ranging from transportation to hospitality to healthcare.”
According to Ben McDonald, a partner at KPMG Enterprise, both in the UK and Europe, a number of factors are driving a surge in VC activity – including low interest rates compelling investors to seek avenues of greater return, strong participation by corporate investors, and new capital sources including hedge funds, mutual funds and sovereign wealth funds. Taken together, these factors mean that VC-focused investment capital is more available than ever before.
He explained that while many analysts are predicting a slight decrease in venture capital investment in the months ahead, he believed the strength of fundamental growth drivers have created strong conditions for continued activity.
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