Invest Europe

• EU convergence and ownership transition among trends fuelling PE investment in CEE
• 22 companies analysed in detail, including cybersecurity and stem cell research leaders

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published ‘Private Equity in CEE: Creating Value and Continued Growth’, an in-depth study of private equity’s role in innovation and economic development across Central and Eastern Europe.

The report, whose work was led by Invest Europe’s CEE Taskforce, investigates the ongoing convergence of CEE countries with other EU regions and the investment trends that have enabled private equity to be a positive force in the region’s progress. It also highlights the industry’s role in innovation and raising ESG standards. These themes are brought to life through detailed case studies of companies backed and fully exited by private equity investors during 2015-2019.

Private equity is intertwined in the CEE landscape, investing €19 billion in almost 3,200 CEE companies between 2010 and 2019. The industry is also a significant employer and source of new jobs across the region. Private equity-backed businesses employed over 316,000 workers at the end of 2018, with companies supported by Invest Europe members increasing employment by 10.7% for the year, far ahead of the 0.7% achieved by all CEE business and outstripping all other European regions.

“Central and Eastern Europe is the fastest-growing region of Europe and presents a wealth of investment opportunities as it converges with the rest of the EU. Private equity is a valuable source of funding for businesses and plays a central role in helping companies professionalise their processes, grow and enter new markets,” said Eric de Montgolfier, CEO, Invest Europe.

Thierry Baudon, Invest Europe Chair, added: “Having spent three decades investing in Central and Eastern Europe, I have seen first-hand the entrepreneurial ideas and ambitious businesses being created across the region. With private equity backing, these companies are not only becoming world-class businesses, but are also creating jobs, improving ESG practices and driving economic growth, while at the same time delivering strong returns for investors.”

Private Equity in CEE analyses 22 companies in detail, including Bitdefender, a Romanian cybersecurity start-up that protected over 30,000 ransomware victims and helped take down one of the largest criminal dark web markets. The report also details the growth of PBKM, Europe’s leading stem cell bank, based in Poland, which increased employee numbers more than ten-fold to 339 over seven years, as well as Estonian aircraft maintenance group Magnetic MRO that entered 12 new markets under private equity ownership.

The report also identifies some of the more recent exits that have helped contribute to CEE’s success in 2020, as well as fast-growing tech companies that are helping fuel the region’s recovery from the COVID-19 crisis, including Czech cloud messaging platform Infobip and Lithuanian second-hand clothes marketplace Vinted.

It addresses the major themes influencing the investment landscape, including the catch-up in wealth between CEE economies and those in the rest of the EU, the transition from founder ownership to a professional governance structure, consolidation, and the improvement in company management and practices. It also highlights the cost advantages and high-skilled workforces available in the region.

In parallel with the publication of the report, Invest Europe will host a webinar on private equity’s role in CEE and opportunities for investment across the region on 11 February 2021 at 17:00 CET. The virtual event will involve discussion of the major themes and insight from:

Thierry Baudon, Chair, Invest Europe & Founder, Mid Europa Partners

Anne Fossemalle, Chair-Elect, Invest Europe & Director, Private Equity Funds, European Bank for Reconstruction and Development (EBRD)
William Watson, Head of the Invest Europe CEE Taskforce & Managing Partner, Value4Capital

For more information and to register for the webinar, please click here.

Today the European Securities Markets Authority (ESMA) and the UK Financial Conduct Authority (FCA) published a Multilateral Memorandum of Understanding (MMoU) on the consultation, cooperation and the exchange of information between each of the EEA competent authorities and the FCA.

Invest Europe and the British Private Equity & Venture Capital Association (BVCA) jointly welcome the commitment made by UK and EU competent authorities to cooperate and exchange information in the future. As we have stated in our mutually agreed position, the private equity and venture capital industry is global in its approach to fundraising, sourcing new deals, working and investing. A coherent approach to our sectors’ regulatory environment, particularly across the British Channel, is therefore fundamental.

As such we find it opportune that the MMoU, which covers entities such as asset management companies, including private equity and venture capital firms, will not supersede applicable legislation and will not limit the use of existing mechanisms of crucial importance to our inherently cross-border industry.

Eric de Montgolfier, Invest Europe CEO, stressed that “close coordination between competent authorities and, ultimately, consistent supervision is needed to ensure that private equity and venture capital managers on both sides of the Channel remain able to operate cross-border, including by using delegation arrangements as is permitted under Article 20 AIFMD”. Michael Moore, the BVCA Director-General, noted “cross-border arrangements, including advisory and delegation arrangements, facilitate fund managers’ and investors’ access to relevant investment professionals and portfolio management expertise. These arrangements remain very important for the private equity and venture capital industry, which operates on a cross-border basis”.

Invest Europe and the BVCA will remain at the disposal of national competent authorities and ESMA in case they wish to receive any further information about the way our industry operates.

The MMoU is available here​.

• Private equity raises €49 billion in H1 2020, in line with prior year
• H1 investment totals €36 billion as firms target activity to strengthen companies

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published ‘Investing in Europe: Private Equity Activity H1 2020’, a comprehensive report on private equity activity in Europe during the first half of the year. The report reveals a resilient investment and fundraising environment, as investors and fund managers continue to actively invest in European businesses despite the disruption caused by COVID-19.

Private equity funds raised €49 billion in the first half of 2020, in line with last year’s first half figure, putting the industry on track to raise a full-year total on a par with average fundraising level achieved over the last three years.

Over the same six month period, private equity funds invested €36 billion and backed 3,401 companies, with about 60% of investment value going into follow-on investments, as the industry supported its businesses through the intense liquidity crisis caused by the introduction of economic lockdown measures across Europe.

The figures also highlighted the industry’s continued focus on innovation as investments in ICT and biotech & healthcare accounted for over half of capital invested. In addition, venture capital investment achieved a new half-year record with €5.6 billion invested into innovative start-ups and scale-ups. Overall private equity investment was 17% lower in value as tougher trading conditions and worsening outlooks impacted investment.

“European private equity has demonstrated its adaptability through the crisis caused by ongoing pandemic, supporting existing portfolio companies as and when needed, while continuing to invest in new businesses that require capital and operational expertise to grow,” said Eric de Montgolfier, CEO, Invest Europe.

He added: “While the outlook remains uncertain as governments tighten restrictions on people and businesses, private equity is well placed to help Europe weather the tough conditions and emerge stronger. Indeed, Europe’s private equity managers have shown a clear focus on steering their businesses through the crisis and have the support of pension funds and other long-term investors that are clearly committed to the asset class.”

Following on from its first half activity data report, Invest Europe in collaboration with Arthur D. Little, the international management consulting firm, is preparing to launch the first edition of a report based on a pan-European, forward-looking survey, that captures views from private equity managers and investors on the future of the industry in the context of the COVID-19 pandemic.

The report, which will be released during a webinar hosted by Invest Europe and Arthur D. Little later this month, assesses the impact of COVID-19 on private equity and venture capital but also finds that about 60% of managers and investors expect capital allocations to private equity to rise over the next three years. In addition, a majority expect stronger investment opportunities over the coming 12 months compared to 2019 and believe that ICT, biotech & healthcare and business services will be important areas for investment in the future.

To read the Invest Europe H1 private equity activity report, please click here. To find out more and sign up to the webinar on the pan-European private equity survey, please email us here.

• European buy-outs delivered an IRR of 15.00%, beating MSCI Europe index return of 5.84%
• European VC returns an IRR of 16.79% over a 10-year horizon, close to that of North American funds

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published two new reports demonstrating private equity’s long-term outperformance of public equities. The data shows that European buy-outs delivered an annualised net IRR of 15.00% since inception to end-2019, far ahead of the 5.84% achieved by the MSCI Europe, while growth investments and venture capital also clearly beat equities benchmarks.

The research comes from two Invest Europe publications: the first, ‘Benchmarking Public and Private Markets with the Public Market Equivalent (PME)’ compares a range of performance metrics to determine their relative strengths and weaknesses, while the second, ‘The Performance of European Private Equity Benchmark Report 2019’, records private equity performance over the last four decades.

With the publication of these reports, Invest Europe is putting private equity performance under a new lens, comparing like-with-like to create a transparent and fair account of private equity performance and its contribution to investors.

Eric de Montgolfier, CEO of Invest Europe, commented: “As the private equity industry has matured, it has become clear to fund managers and investors alike that traditional measures for comparing private equity investments with listed equities are perfectible. With the publication of these two reports, Invest Europe is demonstrating European private equity’s clear outperformance while supporting the drive to more consistent and robust performance metrics that can enable investors to compare assets more easily.”

Invest Europe’s report on benchmarking public and private markets investments analyses the different metrics available for measuring private equity fund performance. It identifies the strengths and weaknesses of the internal rate of return (IRR), multiple of invested capital (MOIC) and public market equivalent (PME).

The report identifies the modified public market equivalent (mPME), one of the second-generation PME metrics developed by investment advisory firm Cambridge Associates, as an additional and sophisticated tool for assessing private equity performance. mPME enables investors to take account of the effect of holding periods on investment performance and separate the intrinsic performance of the fund manager from the general evolution of markets. It also helps address the challenge of assessing the performance of active funds, that are conservatively valued during their lifetimes, against public equities.

Invest Europe’s performance report measures European private equity returns against relevant stock market indices, as well as private equity funds from North America and the rest of the world on a range of metrics.

The results show that for time horizons of 10 years and over, European buy-outs have routinely delivered an annualised IRR of between 15.00% and 15.50% net of fees, while mid-sized buy-outs generated the best returns of 16.65% over the long term and outperformed the MSCI Europe index by the widest margin.

European venture capital returned a net IRR of 16.79% over a 10-year horizon, performing on a par with North American funds over the same period, while the European growth capital private equity segment performed consistently strongly, generating an annualized IRR of 13.28%, outperforming the MSCI Europe which returned 7.32% over the same timescale.

• European buy-outs delivered an IRR of 15.00%, beating MSCI Europe index return of 5.84%
• European VC returns an IRR of 16.79% over a 10-year horizon, close to that of North American funds

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published two new reports demonstrating private equity’s long-term outperformance of public equities. The data shows that European buy-outs delivered an annualised net IRR of 15.00% since inception to end-2019, far ahead of the 5.84% achieved by the MSCI Europe, while growth investments and venture capital also clearly beat equities benchmarks.

The research comes from two Invest Europe publications: the first, ‘Benchmarking Public and Private Markets with the Public Market Equivalent (PME)’ compares a range of performance metrics to determine their relative strengths and weaknesses, while the second, ‘The Performance of European Private Equity Benchmark Report 2019’, records private equity performance over the last four decades.

With the publication of these reports, Invest Europe is putting private equity performance under a new lens, comparing like-with-like to create a transparent and fair account of private equity performance and its contribution to investors.

Eric de Montgolfier, CEO of Invest Europe, commented: “As the private equity industry has matured, it has become clear to fund managers and investors alike that traditional measures for comparing private equity investments with listed equities are perfectible. With the publication of these two reports, Invest Europe is demonstrating European private equity’s clear outperformance while supporting the drive to more consistent and robust performance metrics that can enable investors to compare assets more easily.”

Invest Europe’s report on benchmarking public and private markets investments analyses the different metrics available for measuring private equity fund performance. It identifies the strengths and weaknesses of the internal rate of return (IRR), multiple of invested capital (MOIC) and public market equivalent (PME).

The report identifies the modified public market equivalent (mPME), one of the second-generation PME metrics developed by investment advisory firm Cambridge Associates, as an additional and sophisticated tool for assessing private equity performance. mPME enables investors to take account of the effect of holding periods on investment performance and separate the intrinsic performance of the fund manager from the general evolution of markets. It also helps address the challenge of assessing the performance of active funds, that are conservatively valued during their lifetimes, against public equities.

Invest Europe’s performance report measures European private equity returns against relevant stock market indices, as well as private equity funds from North America and the rest of the world on a range of metrics.

The results show that for time horizons of 10 years and over, European buy-outs have routinely delivered an annualised IRR of between 15.00% and 15.50% net of fees, while mid-sized buy-outs generated the best returns of 16.65% over the long term and outperformed the MSCI Europe index by the widest margin.

European venture capital returned a net IRR of 16.79% over a 10-year horizon, performing on a par with North American funds over the same period, while the European growth capital private equity segment performed consistently strongly, generating an annualized IRR of 13.28%, outperforming the MSCI Europe which returned 7.32% over the same timescale.

‘The Performance of European Private Equity Benchmark Report 2019’ and ‘Benchmarking Public and Private Markets with the Public Market Equivalent (PME)’ are available to Invest Europe members. To request a copy of the reports, please email media@investeurope.eu.

• Private equity backed firms added over 173,000 jobs in 2018, 5.5% employment growth
• First ever report underlines industry’s key role in employment and job creation

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published its first ever ‘Private Equity at Work’ report. A total of 10.5 million people were employed at 22,659 private equity backed businesses in Europe at the end of 2018 – the first full year analysed in the research. The figure represents 4.5% of the continent’s active workforce and equates to more than the entire population of Greece.

The research presents a transparent account of European private equity’s record on employment, demonstrating the industry’s commitment to workers and job creation just as businesses across the continent seek to bounce back from the economic impact of the COVID-19 crisis.

The report also highlights the impact of private equity investment and active management on job creation. Companies supported by Invest Europe members created 173,124 net jobs in 2018, more than the number of people passing through Amsterdam Central Station each day. Employment levels at those companies increased by 5.5% in 2018, five times the 1.1% growth achieved by European businesses on average. All stages of private equity created jobs at a higher rate than the European average, ranging from 5% for buyouts to 16% growth for venture capital.

“Invest Europe’s Private Equity at Work demonstrates just how deeply ingrained private equity is in the economic and social fabric of Europe. The industry is a major supporter of employment across the whole continent. Not only do its companies create jobs, but they do it at a much faster rate than the average European business,” said Eric de Montgolfier, CEO of Invest Europe.

De Montgolfier added: “Private equity is an engine for growth. And growth is an engine for job creation. In these challenging times, private equity backed companies are not immune from the unprecedented impact of COVID-19 on the economy. However, the industry’s focus on building better businesses, supporting investors and fuelling innovation, in turn driving growth and job creation, means that private equity has a critical role to play in Europe’s economic recovery.”

The report analyses the industry’s contribution to employment and job creation across every European region and all major industry sectors. Private equity backed businesses incorporated in Ile-de-France employed 1.2 million people, while nearly 3.4 million people worked for companies in the business products and services sector across Europe. Biotech and healthcare were among the best performing industries for job creation, increasing employment by 9.0% in 2018.

The research draws particular attention to private equity’s key role in helping small and medium-sized enterprises (SMEs) employing fewer than 250 staff, the backbone of the European economy, achieve their growth aspirations. A total of 14,500 private equity backed SMEs employed almost 900,000 people across Europe at the end of 2018. These companies increased employment at a rate of 10% in 2018, with over one in ten graduating to a higher business size category.

Invest Europe has started collecting data for future employment and job creation reports, expanding the scope of the study to capture information on more private equity backed companies in Europe. Over time, this data will expand to create a comprehensive picture of private equity’s contribution to jobs and the economy that those jobs support. To download and read Private Equity at Work in full, please click here.

• Investment rises 7% to €2.95bn, VC investment achieves new record

Private equity firms invested in a record 464 companies in Central and Eastern Europe (CEE) in 2019, with investment increasing by 7% year-on-year to €2.95 billion, as the industry strengthened its commitment to the SMEs and start-ups that are fueling the region’s economic growth and innovation, according to Invest Europe data.

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today released its 2019 Central and Eastern Europe Private Equity Statistics. The report shows that private equity investment reached the second-highest total ever recorded at €2.95 billion, with the number of companies up 10% on the previous year to a new all-time high. Both figures are well above the previous five-year average for the region.

Venture capital investment doubled to a record €338 million in 2019, with 369 companies receiving VC support. The result followed record VC fundraising over the past three years, underlining the CEE’s booming start-up culture, focused particularly on Hungary and Poland.

Robert Manz, chair of Invest Europe’s Central and Eastern Europe Taskforce, commented: “Since the fall of the Berlin Wall three decades ago, Central and Eastern Europe has undergone a remarkable political and economic transformation. Private equity is proud to have played its part, bringing not only capital, but also the expertise and skills to help drive the region’s successful convergence process.”

Eric de Montgolfier, CEO of Invest Europe, added: “The 2019 Central and Eastern Europe Private Equity Statistics paint the picture of a mature investment ecosystem that still has plenty of room to grow. Across the region, private equity and venture capital is supporting innovation and business expansion, which in turn is driving economic growth and job creation.”

Estonia was the leading destination in terms of investment in 2019, accounting for 23% of the private equity capital invested in the region, followed by Poland (20%) and Romania (19%). About half the investment flowed into the information and communication technology (ICT) sector, aiming to follow in the footsteps of CEE tech leaders including Bucharest-founded business automation software group UiPath and Polish online medical appointment booking system developer DocPlanner.

Fundraising for Central and Eastern European private equity funds was €1.4 billion in 2019, in line with the previous five-year average. At €631 million, venture capital firms accounted for 45% of the capital raised, the second-highest total on record. Buyout funds represented 40% of the total raised, with growth funds accounting for the remaining 15%.

The 2019 Central and Eastern Europe Private Equity Statistics are available to download from Invest Europe’s website, investeurope.eu. Please click here to access the full report.

• Anne Fossemalle of the EBRD named as Chair-elect for 2021-2022

Thierry Baudon, 2019-2020 Chair of Invest Europe, is to continue as Chair, following the sudden and unexpected death of Roderick “Rory” Macmillan (Chair-elect for 2020-2021) last month. Thierry will remain in the role to steer Invest Europe through the challenges ahead and help cement private equity’s critical role in the European economic recovery.

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, last month learned of the sad passing of Rory, Managing Director, Global Government Affairs, The Carlyle Group. As Vice-Chair of the Large Private Equity Platform (EPER), and a long-term supporter of Invest Europe, Rory was due to succeed Thierry, former Managing Partner of Mid Europa Partners, in June at the association’s Ordinary General Meeting. Our thoughts remain with Rory’s family and his husband Koen Kleyn.

Thierry Baudon commented: “Rory was a vigorous supporter of invest Europe and a strong voice for the private equity industry. He was passionate about many issues, including ESG and gender, diversity and inclusion. We will honour his memory and contribution by striving to show the private equity industry’s leadership on these matters, as well as many others.”

With Thierry’s ongoing guidance, and under the leadership of Eric de Montgolfier, CEO of Invest Europe, the association will continue to demonstrate private equity’s critical role at the centre of the European economy, safeguarding and bettering the pensions of millions of Europeans, while fueling innovation, feeding entrepreneurship and growing people, companies and ideas where others will not, and dare not.

Total fundraising in Europe in 2019 climbed to €109 billion, the highest total over the past decade, with over two-thirds coming from long-term investors, including pension funds and insurers. In parallel, the total equity amount invested in European companies increased to €94 billion in 2019, the highest level of investment ever recorded. Some 85% of companies backed were small and medium-sized enterprises (SMEs), the engine of the European economy.

As Chair, Thierry will continue to be supported by Invest Europe’s board of directors. Anne Fossemalle of the European Bank for Reconstruction and Development, currently Vice-Chair representing the LP Platform, has been appointed Chair-elect for 2021-2022. Meanwhile, Max Römer, Quadriga Capital, has also agreed to remain as Treasurer for another year.

To read more about Rory Macmillan and his contribution to Invest Europe and the industry, please click here. For more information on Thierry, you can read his biography here.

• 10% annual rise to record high of €94 billion in equity invested in European firms
• Over 2015-2019, more than 22,000 SMEs in Europe backed by private equity and venture capital funds – almost 85% of portfolio companies

Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, today published its ‘Investing in Europe: Private Equity activity 2019’ – the most comprehensive and authoritative source of fundraising and investment data available, covering over 1,400 firms. The report reveals record levels of private equity fundraising and investment in 2019, underscoring Europe’s attractiveness and unique positioning for the private equity sector.

Total fundraising in Europe in 2019 climbed to €109bn, up 6% from 2018 and the highest total over the past decade. In parallel, the total equity amount invested in European companies increased 10% year-on-year to €94bn in 2019 – the highest level of investment ever recorded – with continued concentration across three sectors: ICT (27%), consumer goods & services (23%) and business products & services (19%).

Small and medium-sized enterprises (SMEs) are the backbone of the European economy and private equity’s overwhelming focus on, and funding of, SMEs reaffirms the sector’s commitment to Europe’s economic engine.

Over the 2015-2019 period, over 22,000 SMEs across Europe have been backed by private equity and venture capital funds, making up almost 85% of the portfolio companies. And the amount committed to private equity funds raising under €1bn over the 2015-2019 period increased by a dramatic 50% – noteworthy given their focus on SMEs and start-ups.

“In the midst of an unprecedented and unparalleled crisis, the private equity sector is uniquely positioned to help jump-start Europe’s economic and societal recovery, given appropriate recognition and support where required,” stated Eric de Montgolfier, CEO, Invest Europe.

“Identifying and nurturing start-ups today is essential for continued innovation in Europe, as well as laying the groundwork for a better tomorrow,” added de Montgolfier, pointing to the €15 billion in venture capital fundraising in 2019 – a 17% increase over 2018 that also marks the 7th consecutive year of growth.

Venture capital investments more than doubled between 2016 and 2019, with backing for almost 4,700 companies in 2019 alone; examples of innovative sectors backed by venture capital include Biotech/Healthcare and ICT, both of which contribute significantly to the battle against the COVID-19 pandemic. And thanks to an increase in average venture capital fund size since the 2008 financial crisis, venture capital-backed businesses and their investors are better equipped to handle crises.

Pension funds and insurance companies, including Europe’s largest institutional investors, make up some 40% of the private equity funding raised in Europe in the 2015-2019 period, a clear indication of confidence in an asset class that directly contributes to better pensions and returns for Europe’s citizens. Over the same period, pension funds have invested  €114bn in European private equity/venture capital funds – a clear endorsement of their long-term contribution and Europe’s leadership position on Environment, Social and Corporate Governance (ESG).

More than 45% of the private equity capital raised across the continent in 2019 came from non-European investors, led by investors from North America (28%). Ensuring private equity’s contribution to the European economic recovery is supported by private equity and venture capital’s focus on the region, with 63% invested domestically, 29% in another European country and a mere 8% from outside Europe.

By its very nature, private equity has always sought to unlock potential through patient capital and vibrant, active ownership resulting in growth and jobs. These qualities, if supported by adequate liquidity and employment-support measures provided by state aid programmes, will ensure the private equity sector and the 26,000 companies (since 2015) it backs, stand ready to jump-start the European economy. And it will do so in solidarity with the entire coalition of European stakeholders required to overcome the current pandemic.

Download the full report here.

• 90% of VC-backed European start-ups increase revenues, create jobs and deliver innovation
• First large-scale study of EU start-ups, covering 9,000 companies across all EU-28 Member States
  

Invest Europe has teamed up with the European Investment Fund (EIF), the EU’s leading venture capital (VC) investor, to release new research that highlights venture capital’s positive impact on fostering innovation, growth and job creation at start-ups across Europe.

The report entitled The VC Factor: Data-driven insights about VC-backed start-ups in Europe is the result of an ambitious research collaboration between the EIF and Invest Europe, the association representing venture capital, private equity and infrastructure sectors and their investors in Europe. The ground-breaking report tracked and analysed data on almost 9,000 young companies between 2007 and 2015, as well as some €35 billion of VC investment flows, offering new insights into Europe’s burgeoning start-up scene.

“We are delighted to have teamed up with Invest Europe for this data-driven project to analyse venture capital investment and its role as a catalyst for start-up success,” said Helmut Krämer-Eis, EIF’s Chief Economist. “Knowledge is power – and hence we are confident that the new report   increases the understanding of the European VC ecosystem and delivers further proof of the positive impact of venture capital on start-ups.”

“We are thrilled to have worked with the EIF on The VC Factor,” said Invest Europe CEO Eric de Montgolfier. “The research shows that the benefit of venture capital funding for the vast majority of companies is substantial. Receiving VC investment enables them to unleash their full potential, growing further and faster than their peers while also creating new innovations and empowering investors into European VC as an asset class.”

The report acknowledges that not all VC-backed start-ups survive, nor do they always perform as their founders dream. However, over a third of start-ups studied were high performers, generating strong revenue growth, creating significant numbers of jobs and spurring innovation.

Key findings include:

• One in five start-ups were classified as “all-rounders”, generating 141% revenue growth on average and a 54% increase in employee numbers over four years.
• 7% of start-ups were classified as “visionaries”, performing strongly on intellectual property with intangible assets such as patents up by 534%.
• 8% were classified as “superstars”, outperforming on all fronts with revenues growing 358%, intangibles by 340% and staff by 109%.

The VC Factor compared start-ups with VC backing to those without in order to determine the impact of venture investment and expertise. It found that without VC investment, start-up performance would have been significantly poorer across all profiles, while the number of “laggards” that shrink in size would have increased more than threefold. In addition, almost half of high-growth start-ups would have either fallen into a much less successful profile or defaulted in the absence of VC.

The report also made new discoveries about the locations of VC investments. The six largest VC hubs in Europe received one third of all investment activity, led by Ile-de-France, inner London and Berlin. Meanwhile, Nordic start-ups – centred around the fourth-largest hub Stockholm – were the most innovative in terms of new patents and intangible assets. At the same time, emerging start-up hubs are shaking the status quo with 25% of capital deployed into cities with fewer than 100,000 inhabitants.

To read The VC Factor report in full, please click here.

NOTES TO EDITORS

The study highlights successful start-ups such as InFarm, the Berlin-based vertical farming group which is aiming to reduce food miles, Dutch Solynta, a developer of potato seeds that are designed to help developing world growers by being less bulky and perishable than tubers, and Inkitt, a book publishing platform that wants to give aspiring authors a fair chance of success.