Business climate in the investment market hurries from record to record
Berlin - The business climate in the German private equity market improved again in the third quarter of 2017. The business climate index of the German Private Equity Barometer rose by 4.9 points to 70.2 balance points, significantly exceeding its record value from the second quarter of 2017. The indicator for the current business situation rose by 1.9 points to 70.5 balance points, while the indicator for business expectations increased by 8 points to 69.8 balance points.
The development reflects a new record high in the early-stage segment of the private equity market. Here, the business climate indicator rose by 12.8 points to 69.1 balance points. Both the current business situation (+9.1 to 66.7 balance points) and the business expectations (+16.5 to 71.5 balance points) are picking up significantly.
The VC business climate is being driven by rising valuations of exit and funding opportunities, which are reaching new highs. In addition, the fundraising and innovation climate remains very good. Assessments of the level and quality of deal flow as well as entry prices have also stabilized at their respective levels after slipping in the previous quarter.
The business climate in the late-stage segment remains exceptionally good. At 71.1 balance points (-0.4), the business climate indicator here in the third quarter of 2017 remains only slightly below its best value of the previous quarter. Investors’ assessment of their current business situation is slightly worse than in the second quarter, but they are somewhat more optimistic about their business expectations. The indicator for the current business situation decreased by 2.6 points to 73.7 balance points, while the indicator for business expectations increased by 1.8 points to 68.5 balance points.
The still very good business climate in the late-stage segment is supported by almost the entire market environment: fundraising climate, assessment of the level and quality of deal flow and exit climate show top values. Entry-level prices remain problematic: Dissatisfaction with called valuations is increasing for the sixth quarter in a row.
“The unprecedentedly good fundraising climate is now also reaching start-ups,” says Dr. Jörg Zeuner, Chief Economist at KfW, “financing rounds are getting bigger. The latest BVK figures show that more than twice as much was invested per start-up in the last two half-years as in 2012 and before. The higher financing rounds are necessary in order to prevent domestic start-ups from falling behind internationally from the outset. For local VC investors, the situation still takes some getting used to, as can be seen from their dissatisfaction with entry prices.”
Ulrike Hinrichs, Managing Member of the BVK Board, adds: “It is particularly pleasing that the very good mood and optimism about the future have now also reached the VC sector. Here, a lot has been done in recent years by all parties involved to advance Germany in start-up financing. Looking at the generally high level of valuations, it is important to note that macroeconomic conditions, low interest rates, but also strong company results thanks to the Draghi stimulus are contributing to these company valuations. But this is not private equity or venture capital specific, if you look at the German and international stock indices, which are rushing from record to record these days.”