Digital technology is sweeping through our daily lives, causing a revolution that is unlocking investment opportunities with a highly attractive return potential.
The recent experience of Idinvest portfolio company Criteo is a perfect example. Ten years after its launch, and having received venture capital backing prior to its Nasdaq listing in 2013, the online performance advertising company boasts a market capitalisation in excess of $2.4 billion, and has delivered historical shareholders a return of 80 times their initial investment.
It would be a mistake to think that Criteo is an exception in Europe. Today, major change is being driven by a large number of new companies that require capital and the strategic support of active shareholders to emerge. The UK and France have already set up fertile ecosystems which will give rise to new businesses, new uses for technology and new sources of revenue. Investing in this field will help accelerate the trend and enable European entrepreneurs to flourish. It took 40 years to build up Silicon Valley. It could be much faster in Europe.
The investment opportunity is all the more compelling as the digital revolution has only just begun. The internet and the communication applications associated with it are disrupting communication patterns and tools which until recently we thought would never change. Just a couple of years ago, few of us would have believed that in 2014, streaming sites such as Spotify or Deezer would lead the market for digital music sales. And even fewer could have imagined that Airbnb would come and disrupt – or according to some, threaten – the hotel industry, or that an app like Uber would cause such regulatory uproar in the field of urban transport.
These new uses of technology are driving profound change in the economy. No sector or industry can be presumed safe, no revenue stream be considered perpetual. Even the largest industrial companies are viewing these new players as potential rivals and recognise their ability to disintermediate a given market and to capture some of its value through technology. The financial sector is also affected. After its IPO at the end of 2014, Lending Club, the peer-to-peer website linking up lenders and borrowers, has a market capitalisation in excess of $7 billion.
In 2014, €897 million of venture capital was invested in France alone, two thirds which went into digital companies. We estimate that in 2015 this figure will increase by 20 percent and help fund the next generation of technology-driven per-to-per businesses in Europe. For investors, the value creation opportunity this represents is significant. They should not miss out.
Idinvest Partners is a European private equity firm with €5 billion under management, specialising in the low and middle market segment.