The business climate in the German private equity market reached a new record high in the third quarter of 2017 in the German Private Equity Barometer of KfW and the Association of German Capital Companies (BVK).
Already in previous quarter The German Private Equity Barometer reached a record high. This development is driven by the prospering venture capital market. Exit and funding opportunities, in particular, are reaching new highs. The fundraising and innovation climate also remain at a high level. Assessments of the size and quality of deal flow, as well as entry prices, have stabilized at a high level after a slump in the previous quarter.
VC investors must get used to higher valuations
Unlike the VC market, the late-stage segment isn't reaching record levels. Nevertheless, the investment market for more mature companies is also developing well. The only problematic aspect was the entry prices. Dissatisfaction with the requested valuations has been increasing for the sixth consecutive quarter.
“The unprecedentedly good fundraising climate is now also reaching startups,”
says Dr. Jörg Zeuner, Chief Economist of KfW,
"Financing rounds are getting bigger. The latest figures from the BVK show that more than twice as much was invested per startup in the last two half-years as in 2012 and before. The larger financing rounds are necessary to prevent domestic startups from falling behind internationally right from the start. For local VC investors, the situation still takes some getting used to, as can be seen from the dissatisfaction with the entry prices."
Ulrike Hinrichs, managing BVK board member, adds:
"It's particularly encouraging that the very positive mood and optimism for the future have now also reached the VC sector. A great deal has been achieved here in recent years by all involved to advance Germany's startup financing. Given the generally high valuation level, it must be noted that the overall economic conditions, the low interest rates, but also the strong corporate results thanks to the Draghi boom are contributing to these company valuations. However, this is not specific to private equity or venture capital, if one looks at the German and international stock indices, which are currently racing from record to record."
