What are the biggest challenges & opportunities facing venture firms in Europe?

What are the biggest challenges facing venture firms in Europe?

One notable challenge facing venture funds in Europe, as well as across the global venture sector, is that some of the most interesting and cutting edge research is not necessarily being done in the places where VCs sit – central London, Frankfurt/Munich, Paris, NYC, Sand Hill. Rather, a lot of this research is being done out in the regions – the East Midlands of the UK, etc., and the challenge for VCs is finding a way to get closer to the places where the research is being done so they know about it early on.

Another challenge for the funds is about expertise. Some of the most compelling research that can have the greatest impact requires specialized knowledge to really understand it and to understand its potential. Unlike investing in internet or social websites, etc., investing in biotech, medtech, cleantech often means that in order to properly assess the opportunity, investment funds will have to bring specialised knowledge closer to the assessment process. Having a scientific advisory board on the website that is cosmetic is not going to cut it if funds want to remain competitive and to invest in truly great game changing science.

Also, for funds to continue, they need to work on investor relations in a way that perhaps they never have before. The investors who might be more tolerant of the level and timeline of funding in these markets are much more likely to be corporates who see it as an opportunity to have early view of things to come and a place at the table for interesting opportunities. That means speaking the language of corporate investors and understanding their interests and motivations as corporate rather than other types of return-oriented investors.

Conversely, what are the biggest opportunities?

I think that if funds are structured well so that they can withstand the economic flux, are armed with the expertise to invest intelligently in truly disruptive technology in cleantech, biotech, and medtech, and they have developed relationships with feeder funds and universities for finger-on-the-pulse investment opportunities as well as onward investment for their portfolio companies, then there is great opportunity. Gone are the days, if they were ever truly here, when you could sit in your office and wait for great opportunities to walk in the door. Now those who get up and hustle and speak the language of science, discovery, and know the landscape of their target sectors will not only survive but thrive!


1 March 2010

Notebook Archive