24 May, Pan-European Private Equity and Venture Capital Activity

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1 24 May, Pan-European Private Equity and Venture Capital Activity

2 1 About the European Private Equity & Venture Capital Association EVCA is the voice of European private equity and venture capital. We promote and protect the interests of our more than 1,3 members, to ensure they can conduct their business effectively. EVCA engages policymakers and promotes the industry among key stakeholders, including institutional investors, entrepreneurs and employee representatives. EVCA develops professional standards, research reports and holds professional training and networking events. EVCA covers the whole range of private equity, from early-stage venture capital to the largest buyouts.

3 2 Funds raised and investments 12 billion Funds Raised Investments Source: EVCA/PEREP_Analytics

4 3 Private equity funds raised - evolution (industry statistics incremental closings during year) 12 billion Source: EVCA/PEREP_Analytics

5 4 More GPs expected to fundraise in 211 European private equity firms by vintage year of latest fund raised Before 25 16% Evergreen 14% 25 6% 21 1% 26 12% 29 1% 27 18% 28 14% Source: EVCA/PEREP_Analytics

6 5 Funds raised by fund stage focus (incremental closings during year) billion Early-stage Later stage venture Balanced Total venture Growth capital Source: EVCA/PEREP_Analytics

7 6 Funds raised in 21 independent venture fundraising (cumulative amount at final closing - top 5 countries) million 8 million # 11 # 12 # 3 # 4 # 2 France United Kingdom Netherlands Germany Denmark 2 Amount Average fund size Source: EVCA/PEREP_Analytics

8 7 VC fund average size has become sub-optimal million 14 Number of funds Early-stage Later stage venture Balanced Total venture 27 average fund size 28 average fund size 29 average fund size 21 average fund size 27 number of funds 28 number of funds 29 number of funds 21 number of funds Source: EVCA/PEREP_Analytics

9 8 Average size of investment per company million Seed Start-up Balanced Total venture capital Growth capital Source: EVCA/PEREP_Analytics

10 9 21 Venture investments by number of employees (market statistics) in million Amount invested Number of companies number of companies 1,8 1,6 1,691 1,8 1,6 1,4 1,4 1,2 1,2 1, 953 1, SMEs Full-time equivalent staff by interval Source: EVCA/PEREP_Analytics

11 1 Extremely strong fundamentals for European VC A growing number of serial entrepreneurs World class R&D and centres of excellence producing cutting edge technology An established and experienced investor community from early-stage onwards A political will at EU-level to achieve smart growth by harnessing innovation

12 11 Need initiatives to encourage private investors The European Commission is currently considering an EVCA proposal to create a funds-of-funds scheme in order to attract private sector capital into European venture VCs must be able to raise funds freely, through a pan-european fund passport. To revise and modernise the public procurement legislative framework Europe must encourage long term investment, particularly in value-creating asset classes

13 12 Introducing Solvency II A raft of capital requirement related regulations aimed at institutional investors will encourage shorttermism and drive investment away from long-term growth A comprehensive risk measurement framework for defining capital requirements for insurance companies. Two different approaches foreseen: I. An internal model: developed by an insurer to analyse and quantify risks, to determine economic capital required to cover them. II. Standard model: a highly conservative standard approximation for insurers that do not measure their risks. PE included in Other equities category, subject to a base shock test of 49%. Solvency II will set the tone for comparable regulatory regimes (e.g. Basel III, CRD IV) that will ultimately encompass c.75% of LP base.

14 13 EVCA strategy two pronged approach Creation of Risk Measurement Guidelines Proactive EVCA initiative to help institutional investors cope with new risk-based rules by providing a framework for quantifying and measuring PE/VC risk (for internal models) Political advocacy: Promotion of long term investment A campaign to explain that punitive treatment of long term asset classes is not in the interests of Europe s pensioners, savers, companies or citizens.

15 14 Europe needs more Venture Capital and Private Equity 1. Private equity and venture capital was not a cause of the crisis 2. PE/VC did not systemically wind-down: its investment model and capital structure remained robust throughout 3. PE/VC is now regulated at an EU-level 4. PE/VC continued to support 2, companies, with a tiny default rate 5. PE/VC is a proven ally in the regeneration of Europe, by investing in SMEs, innovation and helping to restructure industries.

16 15 THANK YOU

17 16 EVCA European Private Equity and Venture Capital Association Bastion Tower Place du Champs de Mars 5 B 15 Brussels Belgium Tel: