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, says IDC
8 November 2001
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" according to 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
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" continues 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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