European Venture Capital snapshot
– released 16 August 2011
There appears to be a trend of retreat by Venture Capital funds in Europe. At the same time, an increasing number of U.S.-based medical technology and device projects are encountering difficulty in fundraising amongst other as a consequent of the less predictable “510k” regulatory pathway with the U.S. Food & Drug Administration (FDA).
In this context it seemed important to gain insights from an experienced investment practitioner (who prefers to answer our questions, one of the last days of July 2011, off-the-record for the sake of simplicity)
1. A-Medica: What are your role and organization?
“I am the head a regional Venture Capital fund in Europe actually in the process of launching one (of the very few) new funds.”
2. What kind of deals are you focusing on?
“Like most others we focus on buy-outs and growth projects.”
3. Could you describe the dynamics of European Venture Capital industry currently, is there a retreat of banking groups and difficulties for some VC funds to attract new money?
“Banks and insurance groups in Europe are selling off assets to reduce their balance sheet. The capital allocation required for “risky” asset classes is high, so Private Equity is up for sale. This is a consequence of the financial crisis started in 2007 and further driven by the new “Basel 3” regulations.
In addition, the increased weight of “compliance” within the financial institutions means that for instance co-investment in a project by an a priori perfectly legitimate fund but based in “tax heavens” like the English Channel islands has become very difficult.”
4. How do you analyse the European situation as to availability of funding for advanced technology projects, compared to other global markets like U.S., Asia?
“Except for university funding, some grants and rare thematic funds, there is practically no venture capital for start-ups and seed stage ventures in Europe. Going back in time there was still early-stage capital funding in the U.K., but not really any longer. “Business Angels” investment is also shifting from early stage to growth. These tendencies started about 10 years and have now accelerated and become a trend across the Western world.
The major 5 – 6 (family owned) conglomerates in India, who dominate the local economy, are also venturing internationally and actually investing across Asia, Europe and North America…
The dynamics for projects attracting early stage funding is shifting from the “Atlantic Rim” to the “Pacific Rim”.
In Europe, the “Lisbon agenda” is dead and there is nothing taking its place”
[Note: the Lisbon agenda’s objective was to transform Europe into “the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion”, by 2010 – according to the Lisbon European Council Presidency Conclusion]
5. What do you think are the implications for early-stage advanced technology entrepreneurs from these developments in European VC markets?
“I do not see any indication of change in the near term. There is a tremendous funding gap for early stage projects needing “small” amounts and this problem is most important in Europe’s “old” economies.
The possibilities are within universities, “Friends & Family”, grants & subsidies…”
6. What would you recommend advanced technology entrepreneurs to do in bridging from prototype to commercial phase?
“Twenty years ago we saw a lot of spin-offs from multinational groups but lack of Venture Capital funding is now constraining it. So it becomes a matter of out-licensing.
For entrepreneurs, the only alternative if funding is not available is to be able to sell off the Intellectual Property Rights early.”
Note: Any opinions expressed represent only their author.
© 2012 A-Medica Sprl and respectively Health Consumer Powerhouse, Ltd.
A-Medica www.a-medica.com supports advanced medical technology entrepreneurs on both sides of the Atlantic, from a prototype stage through commercial revenues, with
– Clinical validation, regulatory approval, reimbursement, product development & manufacturing
– “Return on investment” through M&A, licensing, distribution
– A range of funding solutions, including from non-traditional sources – increasingly important to enable business development