Practices of European Venture Capitalists (Swedish Private Equity & Venture Capital Association (SVCA))

Summary

• European venture capital firms receive an average of 851 investment proposals per year, with 6% leading to closed deals.p.5
• The average fund size managed by independent European venture capital firms is 100 mEUR.p.14
• Trade sales represent 40% of exits for European venture capitalists, while IPOs account for 7%.p.5
• Around 45% of exit multiples received by European VCs are negative or limited (< 2x invested capital).p.9
• European VCs syndicate 64% of their investments, primarily seeking complementary expertise and addressing capital constraints.p.9
• A competent management team is cited by 72% of European VC firms as the most critical driver behind investment success.p.8
• Fund-based European venture capital firms report an average net IRR of 13%.p.9

Key insights

1. European VCs meet with 37% of fund-seeking entrepreneurs, but perform due diligence on only 12% of proposals.p.17
2. Valuation of startups relies on comparable transactions for 71% of European VCs, though 62% also value companies based on round size and target ownership.p.26
3. Pro-rata rights are the most frequently used contractual term, negotiated by 80% of European VCs.p.34
4. European VCs exhibit the least flexibility during deal negotiations when dealing with drag along rights (-49 points) and tag along rights (-49 points).p.36
5. Management team capability is considered the single most critical factor for investment selection by 53% of European VCs.p.21
6. A weak or failing management team is identified by 62% of European VCs as the primary cause of unsuccessful investments.p.47
7. Most European VCs (74%) offer performance incentive programs, with carried interest being the most common structure at 61%.p.63
8. Investment decision-making is structured around majority voting in 36% of VCs and unanimous voting in 31%.p.66