UglyDuck19: The EIF’s 2019 European Venture Conference

Bringing together the European VC community from across Europe, the EIF’s Ugly Duck event 2019 was a chance to hear EIF insights, discuss relevant themes, and identify just how much venture capital in Europe has developed. #uglyduck19

From a nascent market in 2006, emerging managers now hold a prominent role in top performers, life sciences is leading against ICT, and a more efficient use of capital allows European unicorns to realise upswings that most of their US and Asian peers can’t sustain.

Against a backdrop of such robust performances, EIF speakers shared further insights into the current funding and investment environment, and we hosted dedicated deep dive sessions on emerging themes in digital, social impact and life sciences — all areas of innovation potential for European SMEs.

The past year in venture capital has hit new highs. Figures from Q1 2019 show a sustained positive shift in the internal rate of return (IRR) of European venture capital funds, already building on an upwards positive trend. In Q1 2019, the fifty top-performing funds in the EIF’s portfolio returned between 20 and 371% IRR — up significantly from returns of between 10 and 66.44% in Q1 2017.

European life sciences managers continue to outperform. There has been a perception that life sciences are capital-intensive, long-term and illiquid. However, the performance in the EIF’s portfolio tells a different story with some life sciences funds in Europe outperforming ICT.

The EIF’s research has also revealed that 60% of the EIF’s top-10 performing ICT funds, and 70% of Europe’s top-10 life sciences funds have exposure to unicorns. What’s more, focusing on the rising stars remains paramount with 6% of portfolio companies delivering 79% of outperforming funds’ total value. (Funds with DPI >2).

Speaking of rising stars, emerging managers make up four out of five of the EIF’s top-performing funds, showing that Europe continues to be a fertile breeding ground on which young teams can flourish. In the case of unicorns in life sciences, Europe has shown that it delivers higher multiples over invested venture capital at exit than the US and Asia. This displays an efficient use of the capital in Europe, quite literally, doing more with less.

In light of a maturing European VC market and the emergence of potential thematic areas of investment introduced under the upcoming InvestEU programme, the EIF hosted sessions on three crucial areas for investment: life sciences, ICT and social impact.

ICT has long been an area of innovation and growth for venture capital in Europe. Quantum computing could propel this forward even more as the world requires increasingly complex data analytics on expanding data sets and more and more sophisticated algorithms. Applied chemistry, drug discovery and cyber security are just a few areas that could be disrupted by innovations in ICT like quantum computing.

On the topic of disruption, cancer research in Europe is undergoing a form of ‘therapeutic revolution’ with advances in the science behind immunotherapy. Most cancer treatments focus on the cancer itself, but the disruptive power of developments like immunotherapy are patient-focused boosting the immune system instead. Innovations like immunotherapy require strong links between research and industry in order to come to fruition.

Lastly, investing for a social impact is of growing importance in Europe. It is becoming increasingly clear that making a social impact and a financial impact are not mutually exclusive. The tendency for more and more social enterprises to set up their own impact committees means that impact accountability is becoming an important part of the business decisions.

The question remains how we can scale social impact even further because there is no sense in investing for social impact if the VC industry itself does not try to widen its diversity.

Arlan Hamilton outlined the importance of representing a broad range of business founders including people of colour, female and LGBTQ founders, who are currently under-represented in the VC industry. Arlan has pioneered a fund whose mission is to channel investment into a broader range of founders, and she encouraged others to do the same.

A big thank you to our speakers and everyone who joined us. We were delighted to welcome more than 350 GPs and other stakeholders. See you again next year at #UGLYDUCK20!