Abstract
Sentiment indices are widely used tools that are often used to predict market developments. However, only a few indices exist for venture capital (VC) markets, mostly specializing in certain regions or types of investors. This paper introduces a VC market sentiment index that is based on a survey of 379 European VC investors who are almost all decision-makers within their firms, such as partners or CEOs. Hence, it is possible to compare the expected VC market development across different European regions, as well as across industry focuses and investment stage focuses. Additionally, the introduced index allows for a separation between the perception of the market and the perception of the participants’ own funds and portfolios. This study aims to set the starting point for a sentiment index of the European VC market that will be repeated on a regular basis. The results of this index, or a modified version of it, will be published by the European Investment Fund’s Research & Market Analysis.
While overall European VC market sentiment is found to be very positive, investors consistently perceive their own businesses as more positive than the market. Later-stage investors perceive the market slightly more positively than seed/startup investors. Investors that focus on cleantech investments regard the market as worse than investors focusing on information and communications technology and Life Science but still relatively positive. VC investors that are located in the UK and Ireland show only a slightly positive sentiment. Their assessment of the market, especially compared to that of other European regions, is barely positive. On the other hand, they assess their own funds and portfolios comparatively positively.
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- 1.
More information about the EIF can be found on the EIF website www.eif.org
- 2.
- 3.
More information about EIF’s Research & Market Analysis (RMA) can be found here: http://www.eif.org/news_centre/research/index.htm
- 4.
If all participants answered in a neutral way, the sentiment index could not be measured.
- 5.
Please note that “current” refers to the year in which the survey was conducted, i.e., 2017.
- 6.
Since the participants had the possibility to select multiple investment stage focuses, Table 6 only includes those that focus on seed stage, startup stage, or both of these stages (seed/startup stage) or that focus on later-stage investments (later stage). Altogether, the group of later-stage investors consists of 46 participants, whereas the seed/startup investors comprise the answers of 270 investors.
- 7.
It must be noted that the latter two groups include, compared to the group of ICT investors, relatively few participants (Life Science with 81 participants and Cleantech with 21 participants).
- 8.
There were 11 responses from Belgium, 9 responses from Luxembourg, and 44 responses from the Netherlands.
- 9.
There were four responses from Bulgaria, three from Czech Republic, one from Estonia, five from Greece, three from Hungary, three from Latvia, one from Lithuania, six from Poland, two from Slovakia, and three from Turkey.
- 10.
There were 7 respondents from Austria, 50 respondents from Germany, and 14 respondents from Switzerland.
- 11.
In particular, 19 fund managers from Italy, 22 from Spain, and 9 from Portugal.
- 12.
Answers were provided by 5 investors from Denmark, 12 investors from Finland, 9 investors from Norway, and 7 investors from Sweden.
- 13.
In total, 9 respondents are headquartered in Ireland, and 72 are headquartered in the UK.
- 14.
See Masiak et al. (2017) for an analysis of SME financing that provides, inter alia, an approach for categorizing European countries into country groups.
- 15.
Some insights into the reasons for the differences in the index values by region (as well as by other categories) can be derived from the EIF VC Survey question about the biggest challenges for the VC business. See Kraemer-Eis et al. (2018a) for details. The 2019 EIF VC Survey wave includes a question about the most important drivers of expected changes in a firm’s state of business, investment activity, fundraising, and exits.
- 16.
If it is not clear which weighting approach to apply, it can be a more reasonable approach to refrain from weighting and to simply apply a group-based analysis and demonstrate the group-specific differences or commonalities in the results (Jacob et al. 2011). This is exactly the approach of our paper, as well as the related papers that present the EIF VC Survey results, i.e., Kraemer-Eis et al. (2018a, b).
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Regional comparison of market-level questions
Regional comparison of fund-/portfolio-level questions
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Diegel, W., Moritz, A., Block, J.H., Botsari, A., Lang, F., Krämer-Eis, H. (2020). Measuring Venture Capital Sentiment in Europe. In: Moritz, A., Block, J.H., Golla, S., Werner, A. (eds) Contemporary Developments in Entrepreneurial Finance. FGF Studies in Small Business and Entrepreneurship. Springer, Cham. https://doi.org/10.1007/978-3-030-17612-9_6
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