News from 2021-05-21 / KfW Research
Business climate indexes for the German venture capital market
The data for the business climate indexes of the German Private Equity Barometer and the German Venture Capital Barometer are taken from a quarterly survey of the approx. 200 members of the German Private Equity and Venture Capital Association (Bundesverband Deutscher Kapitalbeteiligungsgesellschaften – BVK) and further German private equity companies.
Private equity sentiment brightened at the start of the year
In the wake of the coronavirus slump the recovery of business sentiment in the German private equity market recently improved only very slowly but it has now gained momentum. The sentiment indicator of the later-stage segment gained 18.7 points in the first quarter of 2021, rising to -12.2 balance points, remaining just barely in red territory. Although the various sentiment indicators for the German private equity market paint a mixed picture, most of them improved at the start of the year. Surging economic optimism appears to be leading to a generally improved assessment of the situation of SMEs, so that assessments of the quality and strength of deal flow are positive again, write-down pressure is falling and private equity investors are exhibiting significantly more appetite for new investments. The drop in satisfaction with entry valuations is therefore almost inevitable.
VC market off to a good start in 2021 – Sentiment continues to rise
The positive development of VC business sentiment has continued into the new year. In the first quarter of 2021 the sentiment indicator of the early-stage segment rose by 11.5 points to 27.8 balance points. Only a year after the coronavirus-induced downturn in sentiment, nearly all sentiment indicators for the market environment have turned positive – many closing in on their all-time highs. Assessments of fundraising and exit opportunities improved particularly strongly in the first quarter of 2021. Appetite for new investments has climbed to a new high – no doubt also because of the quality and strength of VC deal flow, the assessments of which have also risen to near all-time high levels.
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