European VCs face price competition not just from corporate acquirers but also US VCs.
VentureSource stats suggest 2004 Median pre-money valuations were at $12.5 in the US, but only €5.5mn in Europe.
It is true that the European venture market is still a little behind the US when it comes to competition on deals (Private Equity conversely are well used to the harsh winds of competition). It’s one of my jobs to tell VCs when they have lost a deal and I promise you, when it does happen, they don’t like it.
I recently asked a European VC about this US vs. Europe venture price discrepancy: Why, I asked, does it exist?
“From the demand side, there are comparably less VCs with smaller funds chasing deals”
But the next bit was what surprised me:
“From the supply side, European entrepreneurs are not sophisticated enough to run competitive processes and decide to go with an investor pretty early in the process”.
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