As investors review their choices for the last quarter of 2014 and the expected $23 billion IPO of China-based Alibaba.com may become the largest US listing in history, NEVEQ also considered where private capital is best put to work. 

Source: http://www.federatedinvestors.com/FII/marketcommentary/detail.do?cid=113353

Figures put together by Federated Investors, a leading US asset manager we often quote, reveal that 2014 is on track to be the top year in terms of both amounts and number of global IPOs. 588 IPOs were done in the first two quarters of the year, compared to 882 in 2013. They raised $117.7 billion by June 2014, compared to $168.3 for the entire year. Investors were most attracted to the financial, consumer, energy, tech and healthcare sectors, which accounted for 38% of all IPOs tracked. Our new fund, NEVEQ II, invests in technology and the pipeline companies’ end customers are in most of these sectors. 

Federated Investors, a respected market participant, expects a 25% return to investors from the current period through the next 2 years, amid concerns for a potential bubble.  Another credible source, Pitchbook.com, placed VC valuations for early stage companies since 2005 and through the same mid-point of 2014. They found that NASDAQ valuations were exceeding early stage companies and came slightly below late stage companies. We conclude that our market closely tracked the same market all investors consider. Hence we focus on the same liquidity prospects all investors do today, in terms of end customer sectors and teams able to provide this growth and the liquidity capacity required to generate the returns.

What does this mean for our investors, the entrepreneurs we help and our chances to score within similar parameters as these indices, knowing it takes 5 to 10 years to generate an exit event in a venture fund? First, we focus on our skills to identify the best potential candidates in such sectors. Consumer and technology were also our most successful end sectors in terms of selection of ideas and exits since 2007. Hence, we built a pipeline of potential investments of these sectors, maintaining the financial sector as a parallel theme. 

The first three transactions we expect to announce within a month are active in these sectors globally. They rely on teams active in our mandate market of Eastern Europe, known for talented engineers and entrepreneurs but not yet a prime spot for the competition and our investors.

Second, we focus on the ability to generate commercial success returns for both the entrepreneurs we back and our investors. This means we chose teams with prior business success in these industries. They are people who already grew an early stage company and understand its growth and exit dynamics. Online consumption of the most wanted categories (work, household and retail purchasing in large and less penetrated end markets, access to individual or enterprise funding and the ability to harness the power of big data and new search channels led our efforts.

Third, we aimed for deals where we could have competent and powerful co-investor partners who can help the management teams achieve fast their objectives. Having such partners increases significantly the chances for success and helps manage risks. Time is money for everyone we work with, from investors to entrepreneurs and all of our partners, and the targets described above are challenging. Time and risk management remained our top priority in the deals we selected and we soon will share with you. Stay tuned.