Venture Capital Overhang in Europe Still High—Report

Stephen Harris

8 April 2005

European venture capital funds raised since 1999 have yet to invest an estimated €10.5 billion ($12.9 billion), according to a survey by VentureOne, a research consultancy. The research found that 13 per cent of 1999 funds, 18 per cent of 2000 funds and 30 per cent of 2001 funds remain to be invested. The years 1999 to 2001, the time when the dotcom boom peaked, were the largest venture capital fundraising years on record in Europe. Together they account for €5.4bn of the overhang. The overhang of US venture capital funds is $53.6 billion, according to VentureOne. However, US firms have raised significantly larger venture funds. The percentages in the US and Europe are similar: about 20 per cent of 2000 funds and 33 per cent of 2001 funds in the US remain unspent. But the figure for 1999 funds is only 5.5 per cent. “Considering the slowdown in venture capital fundraising over the past two years in Europe, the overhang of European capital could be exhausted much quicker than in the US,” said Steve Harmston, director of international research for VentureOne. He added: “That being said, the venture capital investment level in Europe currently remains at a much slower pace - about €3.5bn annually, or one fifth the rate of US investment - which means there is still a considerable pool of money outstanding that could be used to support both new start-ups and follow-on investments in existing portfolio companies.”