In this post, we talk about how the venture capital industry is going through a change, perhaps one of the biggest it has had, since its founding days. By change we mean how the potential of business is diminishing to ever more smaller investors, such as angel investors. We talked about this choice from an entrepreneurs’ point of view in more detail in a post back in December. Some investors in Northern Europe have gone as far as stopping new investments altogether.
We talked to Nexit Ventures about this change. According to them, in October 2010 a large group of European VCs met in Copenhagen to analyse the state of Venture Capital. The findings were dramatic. About 60 or so European VC companies have left the markets altogether. The number is relatively significant as the European Venture Capital Association (EVCA) has some 1200 members altogether. This would be 5% of all their members.
While 60 have altogether left the market, those who are left are also becoming more dormant. Only one third of those left make at least 4 investments a year. This is significant and does not sound good for the European startup scene at large. While this problem isn’t something the Europeans are at by themselves, the problem isn’t quite as large in the US.
In the Nordics, the development after 2000 has followed pretty much that of Europe in general. Last year was pretty dismal too. In the Nordics, both CapMan and Eqvitec stopped making new investments altogether from their technology funds. Both were some of the largest in the region and significant players. Read our article on CapMan.
However, despite all the sad news a few investors have also managed to raise new funds. Conor (Finland), Northzone (Norway) and Via (Denmark) have all raised new funds to continue making investments in the region. It’s also told that people in the field are expecting Creandum to raise a new fund soon.
As we mentioned earlier, the angel investors have also been a significant source of competition for venture capital firms. This has reached new levels in the US where a new breed of angel investors has risen – the super angels. These so called super angels, work somewhat as a venture capitalist – sometimes investing other people’s money together with their own and in other cases their own money only. Sweden has a relatively active angel industry and Finland is also following in its footsteps. Just before Christmas a group of significant individual angel investors got together and formed Finnish Business Angels Network (FiBAN), a national not-for-profit association for private investors.
All in all, the investment industry is going through dramatic changes. I think it’s in everyone’s interests to see it settle down and see the total amount, both in terms of actual investments, but also in euros invested, go up over time.
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Nexit Ventures is a mobile venture capital firm focused on wireless technologies and services. Leveraging its extensive network in the global mobile marketplace, Nexit invests primarily in Nordic and US-based earlystage companies with products and services for a global market. For Nordic mobile companies, Nexit provides a bridge to Silicon Valley markets and exit opportunities.