BVK: Upswing to come for early stage investments

• Early stage investments stabilised in 2003
• Public programmes should be launched to make progress with initial investments and as risk compensation

In 2003, venture capital and private equity investments for early stage companies (seed and start up) totalled 292.4 million Euro according to the Early stage Statistics 2003 published by the BVK in February 2004 as part of the Annual Statistics of the German Private Equity and Venture Capital market 2003.  In 2003, early stage investments came close to the results of the years 1997 (189.7 million Euro) and 1998 (423.9 million Euro). “Although the amount did not sink in the running year the situation remains critical” says Dr. Thomas Kühr, Chairman of the BVK Board. “Missing readiness to invest and lacking finances for the target group of start up and young technological companies endanger the innovative and technological business location Germany”, he continues.

Statistics of the Early stage sector

Statistics of the early stage sector cover the investments and exits of all seed and start-up companies while annual statistics 2003 cover all segments of private equity investments, i.e. venture capital (early and later stages), buyouts and mezzanine. In 2003, investment patterns continued to shift: buyouts increased while venture capital financing in general and in the early stage sector in particular dropped.

Technology investments still in focus

Due to their nature early stage investments focus on technological branches. Investments in 2003 were dominated by information, medicine, bio and communication technologies accounting for 67 %. The geographical focusses were Bavaria (21.5 %), Baden-Wurttemberg (16.7 %) and Berlin (13.5 %) because of the well established and numerous technology centres and scientific institutions in these regions. 88 % of all target companies had up to 19 employees (44 %) or 20 to 99 emploees (44 %).

History proves: Successful developments of early stage investments need public support

It was in the mid-nineties when early stage investments in Germany saw a tremendous upswing resulting from favourable conditions and appropriate exit possibilities for investors reaching their climax in the year 2000 totalling 1.6 billion Euro or 36 % of all investments in Germany. The foundation for this positive development was laid in the mid-eighties when the founding of technology companies was supported by the government; in 1995 the Federal Government launched its programme “Venture Capital for Technology Companies”.

“Looking back we know that these supporting measures were expected to pay off after years, only” says Kühr. “ But without any governmental support such as start-up funds the early stage market would have no chance at all.” The ERP/EIF Fund that will provide 500 million Euro in the next few years for venture capital companies is a valuable addition and meant to be the ignition for a positive development of the market. Selection among the market players has come to an end. Those who remained are experienced private equity companies who with the help of the above Fund and improved tax conditions may hope for a revival of the early stage market.” First positive effects resulting from the support for young innovative companies as part and parcel of the High-Tech Masterplan are expected for the year 2005.

The Early stage Statistics 2003 is available for download under www.bvk-ev.de

Contact

Bundesverband deutscher Kapitalbeteiligungsgesellschaften –
German Venture Capital Association e.V. (BVK)
Dr. Thomas Kuehr, Chairman of the Board
Dr. Holger Frommann, Managing Director
Residenz am Deutschen Theater
Reinhardtstrasse 27 c
10117 Berlin
Germany

Phone: +49.30.30 69 82-0
Fax:  +49.30.30 69 82-20
E-mail: bvk@bvk-ev.de
Website: http://www.bvk-ev.de

VOCATO public relations
Birgit Brabeck/Corinna Bause
Bahnstrasse 19
50858 Köln
Germany

Phone: +49.22 34.6 01 98-0
Fax:  +49.22 34.6 01 98-12
E-mail: bbrabeck@vocato.com, cbause@vocato.com