Europe’s venture capitalists, fearful that the Internet stock bubble has popped, are putting the squeeze on high-technology entrepreneurs seeking new funding.
“I don’t know a company that hasn’t been impacted,” said Philippe Herbert, a general partner with Partech International, a 17-year veteran of the industry with offices in Paris and San Francisco. “Valuations are down 25 percent to 50 percent from what they were three months ago.”
Of course, there are still a few revelers around who haven’t heard the party is over–at least for now. But for the most part, there is a new sobriety among Europe’s venture capitalists today.
“If you were here, you’d see the scars,” said Larry Levy, chairman of Protege, a United Kingdom Internet incubator and services agency, which earlier this month closed a $45 million financing round.
He said it was “a harrowing experience” raising the money from a number of blue-chip European and American investors, led by Partech. It cost him more in equity than he believes he would have given up four weeks previously. “We were 30 percent down on our valuation, and we count ourselves lucky. Even the most experienced venture capitalists are terrified of paying too much today for something that will turn out not to be the flavor of the month tomorrow.”
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The irony is that Europe’s venture capitalists are more flush with committed cash today than ever. Many of the largest firms, including those such as Partech and rivals such as Apax Partners, recently have raised large funds from institutional investors keen to share the sector’s recent fabulous returns. At the same time, there has been a flood of entrants, including several experienced U.S. venture capital firms that believe Europe is the next Internet frontier, as well as big U.S. and U.K. buyout funds eager to get the new economy buzz.
Many venture capitalists publicly welcome the stock market’s recent correction.