Although Europe is not likely to experience a swift recovery, Höppner sees positive elements in the current situation and expects the industry will start to rebound as soon as various reformatory measures taken by Europe’s struggling nations start to bear fruit.
“Although no one can really predict which way the global economy is heading, the industry is also known to invest in difficult environments: it’s all about identifying those companies that have the potential to grow. You can always find potential winners no matter what the overall economic situation is – just as when the dot-com bubble burst at the start of the century. Now is, in fact, the best time for investors to invest in a company or buy a business because prices are relatively low,” Höppner says.
Höppner is reluctant to blame solely the Eurozone crisis for the current difficulties in Europe’s venture capital and private equity sector. Institutional investors’ moods are being dampened by the global economic crisis, which is having a negative impact on all economies worldwide, not just European nations.
“European governments are also taking steps in the right direction to restore confidence to the region. This will eventually reflect well on the venture capital and private equity sector, she anticipates.”
Spurring the real economy
According to Höppner, Europe’s venture capital and private equity industry can play an important role in recovering from the ongoing crises. The sector can provide much needed funds to companies, in particular small- and medium-sized businesses.
“Our industry can be part of the solution to overcome the crises, because we could provide equity to companies that have the potential to become national or even international success stories. Because private equity and venture firms are very selective in what they do, they only invest in companies that really have high potential to grow. But that is actually the best for the economy because those companies really deserve the capital and have the capability to succeed.”
Raising concerns
When discussing the European Union’s plan to tighten its grip on the industry, Höppner is cautiously optimistic. However, some of its planned regulations, unrelated to venture capital and private equity, may cause unintended negative effects.
“The AIFM (Directive on Alternative Investment Fund Managers), for example, will of course be more costly for the private equity firms and mean more bureaucracy, but on the other hand tighter regulation is needed at times such as now. However, there are other pieces of financial market regulation that raise concerns. Mainly regulations that are not aimed at our industry but at institutional investors, for example, insurance companies and pension funds.”
On the other hand, the EU Framework programme for research and Innovation, known as the Horizon 2020 initiative, shows Europe’s interest in helping SMEs gain access to funding, and this is warmly welcomed by the industry, Höppner says.
Read the entire interview from the Growth magazine 3/2012.