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Global venture capital hits all-time high

– Global venture capital fund performance continued to soar in 2019, reaching its highest level ever in Q2 driven by the success of Western European VC funds – 
 
Venture capital funds globally reached their best ever performance in the second quarter of 2019, surpassing the previous high recorded one year earlier, according to the latest Quarterly Private Equity Performance report, published by eFront.

“The European VC industry has had a strong year: it’s extremely well-capitalised following a number of new funds in the market and there are no gaps in the funding chain, which has hampered the ecosystem in the past,” said Pär-Jörgen Pärson, partner at Northzone.

The performance of VC funds globally reached 1.59x during the record period (Q2 2019), which is the highest level over the last ten years, before decreasing slightly to 1.58x in the third quarter. The research showed that 2019 is so far the best ever year for venture capital performance, with high returns associated with moderate levels of risk. 

This can, in part, be explained by the ever increasing globalisation of the resources available to the VC industry. “There are new vibrant hubs in Lisbon, Bucharest, Belgrade and Warsaw, while France, Spain and Germany are now entirely internationalised in how they access talent, address other markets and source capital,” commented Pärson, whose firm Northzone has offices in Stockholm, London, New York and Oslo.

In terms of geography, the report highlighted that Western European VC funds continue to show strong improvement, significantly outperforming the long-term average and setting a new course away from the historical pattern. US VC funds also registered an impressive progression during Q2.

Pärson added: “We’d like to see more European markets implement stock option incentive schemes geared towards startups, which continue to make the top talent playing field uneven with the US. Moreover, immigration rules for skilled workers need to be updated for Europe to access and attract great global talent.”

Other key findings from the report include the fact that selection risk in 2019 was higher than the historic average, but remains in line with the level seen in 2014 to 2016, at a TVPI spread of around 1.9x. Meanwhile, time to liquidity has trended steadily downwards since the record high seen at the end of 2015, but following a slight rise in 2019 now sits at around 3.4 years.

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