European ventures ecosystem is coming through a tough market with long-term confidence

Although the market for fundraising continues to be tough, particularly for smaller and emerging managers, there is still long-term confidence the European ventures ecosystem. 

That was the broad message for the investment funds industry gathered last month at SuperVenture in Berlin, the premier conference for European venture fundraising, which assessed the current state of the market and emerging areas of interest in the European ecosystem.

'Unicorn' proliferation

A growing sense of enthusiasm around European venture fundraising is backed by statistics from Adams Street Partners, the global private markets investment managers,  that noted the number of European "unicorns" is now 14-times higher than it was 10 years ago.   

Adam Street also said that the public markets currently are increasingly focused on profitability, as compared to 2021 when the focus was on high-growth companies – and when these markets become more receptive, there are a large number of European companies ready for initial public offerings. IPO. 

Secondary activity

In common with the BVCA (British Private Equity and Venture Capital Association) Accelarate conference a few weeks earlier, there was plenty of talk in Berlin about secondary activity, 
In particular, there was a focus on the use of opportunities to sell on the secondary market, whether limited partner (LP) or portfolio company stakes, as a catalyst for further fundraising – and putting some money back into LPs hands to allow them to make further investments.

Geographic diversification 

The venture capital (VC) landscape in Europe is increasingly diversifying, the conference heard, as the market looks beyond traditional hubs such as London, Berlin and Stockholm.

This trend is mirrored on a global basis: where once only a handful of cities were known for producing unicorns, now over 150 cities have joined the ranks. 

Fintech startups are leading the charge, with traditional centres such as New York and London being joined by new centres emerging in cities like Toronto, São Paulo, Singapore and Tel Aviv.

Strategy focus

The industry's strategic spotlight remains on artificial intelligence (AI) in terms of funds raised with a specific focus on AI technology, generalist funds increasingly backing AI-focused companies and the use of AI in selecting potential investments. 

One speaker reported that over 50% of VC investment in 2023 was into AI-related companies.  Other strategies highlighted included climate tech and defence tech, with interesting areas of development emerging around dual use versus defence and the appetites of LPs for the sector. 

ESG developments

No conference focused on fund management is complete without some discussion on environmental, social and governance (ESG) developments, with Venture ESG running a session on what this actually means for VCs at a practical level.

VCs that are using ESG metrics in their economics – either LP-facing or regarding team incentivisation – are receiving a lot of interest. 
In general, VCs are reporting that they are seeing ESG being picked up by portfolio companies (in dialogue with early-stage funds) at an earlier stage than in previous years – with the US still lagging behind Europe on ESG.  

An issue with which VCs are still battling is how to coordinate ESG information and reporting, both at fund and portfolio company level, to reduce the current administrative burden of complying with multiple investors' different requirements.

Osborne Clarke's investment funds team, which attended SuperVenture in Berlin, can offer broad market insight and in-depth legal know-how on developments in the European venture sector, drawing on experts across its network of international offices [.. xyz etc.?]