Publication: Világgazdaság
Provider: Világgazdaság
Date: April 6, 2006

Venture capital gaining momentum

Investors close record year in Europe and Hungary

A record amount of venture capital was invested in the past year in both Hungary and Europe, according to 2005 statistics compiled by the Hungarian Venture Capital and Private Equity Association (HVCA) and the European Private Equity and Venture Capital Association (EVCA).

While the number of investments over the past year wasn't particularly striking on the Hungarian market last year, the invested amount was impressive by any measure. Investment volume, according to final figures, was 131 million euros, up from the previous year's 108 million euros. That's above the preliminary estimate of 122 million euros. (If the final figure hadn't been above the preliminary number, the investment would have fallen below the 2002 level.)

The 131 million-euro total is based on 26 investments for which the HVCA has exact figures – four additional investments were realized for which there are no exact figures, meaning the actual investment total is larger. Last year's jump is thanks to the largest deal in Hungarian venture capital investment history, Warburg Pincus' 100 million-euro investment in Euromedics. Aegis Group's investment in Kirowski Rt and Riverside's investment in Diatron MI Kft round out the top three investments in terms of size.

In terms of number of deals, the Hungarian Development Bank (MFB) completed the most deals, investing 7.6 million euros into nine portfolio companies. Primus Capital, which specializes in smaller investments, registered five investments last year. The fund makes just those kind of investments that the larger funds avoid, making Primus a strong player in start-up and primarily early-stage financing. Primus engineered the merger of Mirai Interactive and Red Stars into Arcus Interactive Zrt, which became a significant player on the interactive business solutions market. In terms of number of deals, Kisvállalkozás-fejlesztő Pénzügyi Rt (KVFP) and Euroventures shared the third spot with three investments made public.

It's clear from the Hungarian venture capital and private equity statistics that there are still few deals between 1 million and 5 million euros, and even fewer – at most three per year – in the range of 2.5 million to 5 million euros. Analysts say it would help if Hungarian-led and partially or fully Hungarian-financed venture capital funds were to appear on the market. This is expected already this year, after new regulations on Hungarian venture capital investments were implemented, complementing the new venture capital act that came into effect January 1.

Europe also closed a record year in venture capital and private equity investment – the 43 billion-euro investment total represents a major jump from 2004's 27.5 billion euros. Fundraising was also impressive – fund managers raised 60 billion euros, double the 2004 amount, according to the EVCA. Fundraising efforts were probably helped by the amount and number of trade sales and exits, which were also impressive last year at 24 billion euros.

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