|
That trend looks global, according to a recent study by investment group 3i and PricewaterhouseCoopers (PWC). The study points out that in the first half of the year, investments in the U.S. surpassed the total for all of 1999, which itself saw an increase of 68% -- $136 billion -- over 1998. Venture capitalists have raised as much capital in the first nine months of this year as in all of 1999. "There are no signs that [funding for] the sector is drying up -- on the contrary," says Eddy Mizrahi, an associate at venture-capital group Apax Partners. The sector itself, however, is not as strong as it was in the past. In the largest market, the U.S., bankruptcies and buyouts of Internet startups are on the rise. In France, large numbers of Internet companies that had been banking on speedy IPOs have had to abandon their plans and turn to venture capitalists for the liquidity they need. "It is certain that startups will file for bankruptcy, since they will not find new financing," says Chausson. "But an entirely new ecosystem was created around startups, with new specialized players like headhunters, specialized lawyers, venture capitalists....which function independently of the markets." "SENSE OF TRUST." In France, investment groups have lost less money than would be expected. According to statistics from the French Association for Venture Capitalists (AFIC), the failure rate among companies in which its members invested remains reasonable. On average, over the 10 years ending in 1999, 11.3% of the amount invested in startups was lost -- a figure that represents 15% of the companies in the VCs' portfolios. "We have no elements yet which indicate that that figure has risen this year," says AFIC President Patrick de Giovanni. He adds that "having a good portfolio easily compensates for losses incurred by an individual company." VC funds also have diversified their investments. "E-commerce companies represent less than 10% of the investments we have been making for the past two years," says Philippe Claude, associate and general manager at venture-capital company Atlas Venture. At the end of 1999, the yearly rate of investment profitability by VC funds reached an average of 23.6% over 10 years. In the last five years, that figure reached 47.3%. VCs do not appear to have lost their confidence. Contrary to financial markets, which have been very hesitant of late, "venture capitalists continue to bet on the future," says Xavier Cauchois at PWC France. In the U.S., there is "a general sense of trust in financial politics: weak inflation and unemployment rates, strong consumer demand and innovation. All these factors create a positive atmosphere for profitable investments," says Martin Gagen at 3i in the U.S. Richard Summers at 3i Europe says "venture capital in Europe won't take long before it reaches the same level of penetration as in the U.S.," thanks mainly to a very profitable environment for technology in the field of telecommunications. The 3i-PWC study also reveals that over 200 incubators are already operational in Europe. And despite the disappointment when Chase announced losses in the third semester of this year because of investments in unlisted companies, market professionals are enjoying the general good news. And everyone seems set on enjoying a nice and prosperous ride. By Sophie Fay and Cécile Prudhomme Translated by Inka Resch |
