brabo ventures trend watch

rend Watch, 2006 (1)

Every beginning of a new year we tend to look back and try to summarize the events and highlights of the last year using numbers, facts and statistics. By doing so, we set the goals and expectations for the months to come, and try to perform better than we did last year. Many times the analysis we proof what we more or less already knew or at least had sensed, but secretly hope for new records or interesting trends.

To get down to business, let’s analyze the following graphs showing the 2005 performance of the European venture capital industry and see whether there are lessons to be learned by comparing the 2005 results with those of the previous 10 years.

Graph 1 indicates that in 2005, the European venture capital industry has invested around 10 billion euro in European SMEs. This amount seems to correspond with the average per year over the last 7 years, filtered out the peak of the year 2000.

Graph 2 shows that roughly 5000 companies were invested in by the venture capital companies in 2005. Those 5000 investments are a little less than the average per year over the last 7 years.

Graph 3 combines both graphs and it provides us with an interesting fact: With 10 billion euro spend on 5000 companies, the average deal size of the investments in 2005 is around 2 million euro, this is higher than the years before. Filtered out the year 2000 and 2001, it actually seems to be gradually increasing from year to year.

Let’s bring one additional piece of data material before formulating our conclusions.

Graph 4, the sectorial analysis, shows which industry sectors the above companies are active in, and it seems this picture hasn’t changed from 2004 or the years before. For several years now, ICT and Life Sciences Technologies have been taking up about 90% of all available European venture capital.

Now why is this more important than the ‘wettest month of September summer since 1965’?

It is important for company founders and management teams to know that, if the growth of their company involves risk and requires third party’s money, from the start, they need to be on the technology radar of these capital providers and require funds that the VC is willing to inject.

It looks like in 2006, the most innovative 5000 companies in Europe, requiring approximately EUR 2M and active in the technology sectors below, will be able to attract funding from the venture capital community.

For ICT we see software, hardware, semiconductors, networking technology, equipment, electronics, and internet technology taking a large chunk of the cake.

For Life Sciences Technologies it is biotechnology, medical technology and pharmaceutical companies dividing the share.

In Industry we think of innovative technologies in the food sector, for Energy we saw renewable energy, alternative energy or energy saving technologies, and for Materials, surface treatment and nanotechnology are among the candidates securing financing this year.

Media and Entertainment showed some nice investments in the gaming industry in 2005 (both massively multiplayer online game developers and innovative online gambling companies) and hopefully gets some more attention in 2006.

If you are a company with these characteristics, we wish you a very prosperous 2006, and can advise you to take contact with us for more information and hands-on help on how to attract the investment you need.

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