Kreos Insights

Kreos Capital’s Fourth Annual LP/GP Seminar

By 29/07/2014June 4th, 2021No Comments

It was very good to see over 130 delegates representing a broad range of equity sponsors, institutional investors, advisors and friends of Kreos, getting together for formal sessions and networking over breakfast, coffee and lunch. As well as discussions on a variety of themes, we heard from the CEOs of several Kreos portfolio companies, illustrating the breadth and depth of opportunity we are seeing as we invest our recently-raised fourth fund across  Europe and Israel.

Our keynote speaker was Joe Schorge of Pomona Capital. Joe has a unique perspective on current markets, combining experience as an electrical engineer, as an alternative investment consultant to LPs and as a private equity investor.

Joe highlighted the improved opportunities which LPs are now seeing in the stable European environment after the credit crunch of 2008-9 and the instability of 2011. In particular:

¨ European growth and investments have been stable over the last four years at about 800 to 1000 investments, or EUR 3.5-4.0 billion, per year

¨ most importantly, European assets are priced at a discount compared to US markets, which is one of the main reasons why 54% of LPs believe that Europe is now the region that offers more attractive investment opportunities compared to the US.

Our portfolio company CEO presenters shared insights into the drivers of their success:

¨ Stefan Smalla, CEO of Westwing, the #1 e-commerce player outside the US in the home & living market now operates in 10 countries and had net sales of €110m in 2013.

¨ Samuel Wasserman, CEO of LiveU, whose revolutionary portable live video broadcasting technology using existing mobile services enables live transmissions from any location at a lower cost with no satellite link.

¨ Sebastian Diemer, CEO of Kreditech a German technology-driven financial services company operating in 9 countries provides consumer loans with risk-based pricing using big data and complex algorithms to evaluate credit risk.

Will Quist of Industry Europe moderated a panel discussion, bringing insights from Silicon Valley to focus on the megatrends for European equity sponsors.  The highly experienced panel included: Davor Hebel of Fidelity Growth Partners, Stuart Paterson of Scottish Equity Partners, Nenad Marovac of DN Capital and Jason Ball of Qualcomm.

Key points highlighted were:

¨ the location where underlying innovative technology is developed is no longer as important as it has been in the past. 80% of internet use is now outside the US, and 7 out of 10 companies are able to scale very quickly by leveraging technology developed by a third party which could be anywhere in the world. As a result, the most important driver for companies to build value will be based on industry domain knowledge, branding and understanding of their industry – as we see in high-end fashion retailers and fin tech, where understanding the products is complex and underlying technology is less important

¨ accordingly, in Europe it has been increasingly possible to build a market-leading position that is very defensible, based on local market knowledge, high-quality business models, and superior execution

¨ more  liquidity events in Europe and a much stronger ecosystem mean that CEOs have a clearer choice between taking a lower-value M&A exit in the short term or continuing to build and targeting an IPO in the future. Growing ambition and confidence to build bigger companies fuels a virtuous circle with investors increasingly prepared to support growth-stage businesses which will be the large companies and successes of the future

¨ new opportunities are emerging in the Internet of Things, wearable computing and social media, as smart technology becomes embedded in a wide range of environment management products.

The underlying theme of all the discussions at the event was the significant level of opportunity in European growth companies, and the strength of the ecosystem, at a time when investor focus on Europe is growing.