IDC Forecasts Startup Investments To Rise In Trade Value By 2003
AMSTERDAM – NOVEMBER 8, 2001- IDC expects that valuations for surviving technology startups will reach an attractive point for trade sale activity near 2003, while Europe approaches critical mass in terms of personal and business ICT usage. By 2005 a new crop of startup investments will be reaching maturity in an increasingly networked European ICT environment – this is when the IPO window will begin to open again. As a result, IDC believes that now is a good time for investors to solidify positions in future investment ecosystems.
A tremendous amount of value was destroyed in the B2C sector through poor investments. "Over $2 billion of investment capital has already been destroyed in dotcoms alone," said John Ferrier, senior analyst for IDC's European Innovation Sourcing program. "By 2005, investment write-offs will surpass $14 billion. The good news, however, is that investors will start to experience returns from surviving startups in the coming year. Some startups will be sold at a loss, and some at a gain, but we see encouraging signals that trade sale activity will accelerate rapidly over the next 12 months, unleashing value into the market."
From now through the middle of 2002, there won't be good opportunities to exit startup investments made during the investment boom. However, by 2003, IDC expects about $11 billion to be unleashed in the European market – sparked by trade sale activity from surviving dotcoms and other late nineties startups.
From here value will drop slightly in 2004, only to pick up again strongly in 2005 to levels surpassing $11 billion.
"The extent to which specific investors will be able to claim a portion of liquidable value at a high return will depend on a prudent balance between strategic and financial objectives," continued Ferrier. "Also, some startup categories are better positioned to achieve strong exit events than others. Remaining services startup investments including dotcoms will see a surge in liquidation over the coming year, with combined trade sales value reaching almost $6 billion. By 2005 IDC expects software and networking startups to heat up the IPO market, fetching exceptional ROIs for private equity investors."
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IDC analyzes the types of investors that are still working with startups in Europe, segmenting them into seven categories: venture capitalists, independent incubators, telecoms, management consultants, hardware vendors, software vendors, and ICT services providers. The report also analyzes the formation of ecosystems among these investors and sizes the market for European startup liquidable value for the period 2000-2005. This report is available for purchase from your local IDC office.
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