European VC is setting more than flags on fire, with homerun exits at twice the rate of US managers with half the amount of capital needed. Now that European Venture is back, how will US managers compete?
For exits over $100m in market cap, more than one in four of the winners are European. For those $100m+ exits where the exit market cap is better than five times the capital invested (aka homeruns) — which are meant to be the attractive feature of the US VC industry — more than one in three are European.
The most compelling statistic is the capital efficiency with which European VCs operate. Of the $100m+ exits, the average exit is $251m both in the US and Europe – so there seems to be no discount for European companies.
However, the average European exit has taken $40m of VC backing – almost half the average $70m that US VCs have invested to build the same value companies. These figures are very interesting because the idea of a cheaper single home market advantage in the US is an excuse often given by institutional investors who want to dismiss the European VC market.
The truth is that the home market advantage simply doesn’t exist because European VCs are building companies into winners with half the capital outlay.
For more on this topic see “European VCs emerge from the shadows” at www.evcj.com.