EU unveils plans for a ‘capital markets union’

The EU has unveiled a new plan to encourage companies to tap difference sources of investment.

The European Commission says firms rely too heavily on banks for funding.

It reckons they should explore alternatives, such as venture capital.

The end goal would be to create a single European market for raising capital.

“In the US, SMIs get about five times as much funding from the capital markets or non-bank financing as they do here in the EU. And if our venture capital markets were as well developped as they are in the US companies could have raised an extra 90 billion euros over the past five years,” said Britain’s Jonathan Hill, the EU commissioner for financial stability.

Read more: EU unveils plans for a ‘capital markets union’ | euronews, Europe

European Business: Big Investors Are Finding Ripe Start-Up Targets in Europe - by Mark Scott

Klaus Hommels has invested in some of Europe’s most successful start-ups. That includes Spotify, the music-streaming service, and Klarna, a Swedish online payments company valued at more than $2 billion.

He has also backed several American tech giants like Facebook and Airbnb, the vacation-rental site.

Now, the German venture capitalist is doubling-down on Europe’s tech sector.

On Monday, Mr. Hommels’s venture capital firm, Lakestar, will announce a new fund worth 350 million euros, or $398 million, one of the largest European fund-raisings so far this year. It is more than double his previous fund, raised in 2013, whose portfolio of start-ups includes Harry’s, the American online shaving company, and Algomi, a London-based social network for bond trading.

Mr. Hommels, 48, who lives in Zurich, plans to spend most of the new money on European start-ups, but also a few American fledging tech companies looking to fast-track their global ambitions. He said that as more industries like automotive and energy embrace new tech trends, he would look at early-stage companies transforming the way people — and traditional companies — lead their daily lives.

“Technology has become integral to how we live,” said Mr. Hommels, who also invested in King Digital, the maker of Candy Crush, but sold his stake before the company went public, missing out on roughly $1 billion. “We won’t be afraid to back start-ups with high valuations if we can accelerate their growth.”

The fund-raising by Mr. Hommels is perhaps the strongest evidence yet that investors have rekindled their interest in European venture capital. Just like in Silicon Valley, where companies like Uber, the ride-booking service, have attracted eye-popping valuations, venture capitalists, private equity firms and other investors are now flooding into Europe.

Read more: Big Investors Are Finding Ripe Start-Up Targets in Europe - The New York Tim

Tech Sector Europe: Investors flock to Europe in search of next Supercell - by Mia Shanley and Jussi Rosendahl

Investments in the tech sector in Europe are at $3.22 billion so far in 2013, compared with $3.58 billion last year, according to Thomson Reuters data. Europe makes up 11 percent of global investments so far this year compared with 10 percent in 2012.

Riding a wave of euphoria surrounding the success of Finnish mobile game maker Supercell, venture capital firms are chasing after European tech start-ups in search of the next big thing.

Japanese tech and telecoms group SoftBank's 51 percent stake purchase in 3-year-old Supercell, announced last month, valued the maker of hit games "Clash of Clans" and "Hay Day" at $3 billion.

"Everybody wants to be the new Supercell," Torleif Ahlsand, General Partner at Nordic technology investor Northzone, said at the annual "Slush" tech start-up conference in the Finnish capital.

With low economic growth prospects in Europe and the United States, venture capital investors hungry for yield are looking to new tech start-ups to provide the high level of returns they seek. And the amount of cash chasing the next potential winner could drive up valuations.

A strong market debut by Twitter Inc. in the United States and a comeback by Facebook following a shaky market debut last year has also lifted the mood.

Finnish gaming veteran Lasse Seppanen, CEO of PlayRaven, said in the past he had had to chase the venture capitalists.

"These days, VCs are calling me," he said.

And while investors say there is a risk of bubbles forming, the industry appeared to be growing at a more sustainable pace than in previous tech booms.

"We think there is going to be a steady flow of billion dollar companies in Europe," Kevin Comolli, General Partner at Accel, an early Supercell investor, told Reuters.



Read more: Investors flock to Europe in search of next Supercell | Reuters

Why Europe's Tech Firms ♥ New York - by Matthew Campbell and Zijing Wu

Even with some successes, such as online jukebox Spotify, Europe’s tech industry continues to lag the U.S. Total venture capital investment in the third quarter of 2011 in the U.S. outstripped that in Europe by almost eight times, according to the European Private Equity and Venture Capital Association and the National Venture Capital Association. Only one of the 10 largest global technology companies by market value, Germany’s SAP (SAP), is European. The value of tech companies in the U.S. is $3 trillion, according to Bloomberg data, almost nine times the $351 billion in Western Europe.

But after years spent lamenting their local technology scene, Europe’s startups and their venture capital backers are finally bullish about building businesses on their home continent. They just don’t want to list their shares there. 

Instead, companies including Irish communications software developer Openet and Prague-based antivirus firm Avast Software are headed for initial public offerings in New York, spurred in part by mounting investor interest in Facebook’s $5 billion share sale. “Ten years ago, we would have expected that the majority of the companies we backed would go public in Europe, with a minority in the U.S.,” says Barry Maloney, founding partner of London-based venture capital firm Balderton Capital. “It’s been completely the reverse.”

For more: Why Europe's Tech Firms ♥ New York - Businessweek