“Great Expectations” was the title of EVCA's Symposium in Berlin in June, and that theme was largely reflective of the view of those attendees who deal in the buyout space. “Some Expectations” might have been a more apt reflection of the view of the majority of battle-scarred venture capitalists in the audience.

However, Dirk Kanngiesser, founder and managing partner of Munichheadquartered technology VC firm PolyTechnos Venture-Partners, who represented the European venture community in a discussion on fundraising at the conference, was, and remains, contrarily bullish about prospects for the venture space, despite insisting that the European VC market was “still on probation.”

“There are a lot of exits coming up – a significant amount of money will be returned to limited partners in the next 18 months,” Kanngiesser told PEI in an interview after the conference. “A number of VCs are gearing up to begin fundraising in 2005/6, so the focus in the next 18 months will be very much on driving exits in a much more positive environment.”

A string of significant realisations are essential if limited partners are to be persuaded that European venture is worth another dip. As if on cue, less than a week after Kanngiesser's confident assertions in Berlin, Summit Partners realised almost 4x its investment in the $273 million (€226 million) exit from Jamba AG, a German wireless content services provider. Jamba was sold to Nasdaq-listed technology company Verisign in the largest European venturebacked transaction of 2004.

Earlier this year, UK-based venture capital and buyout firm 3i led a trio of venture investors in an exit from Element 5 AG, a German-headquartered software distribution supplier, via a $120 million (€101 million) disposal.

In addition to successful trade sales, European VCs also require stock markets to reopen and provide an alternative exit route. But despite a general upsurge in recent flotations on AIM, London's growth stock market – 49 IPOs so far this year have raised £551 million compared with nine IPOs worth £7.8 million in the same period last year – European venture-backed IPOs remain scarce.

Kanngiesser thinks this situation will continue until a viable, significant, pan- European public equity market most likely based in London and receptive to continental European venture-backed businesses exists: “Regional markets just don't work. Frankfurt has been burned by the Neuer Markt and London is the logical place to have a truly European stock market that can accommodate high-growth, high-technology companies.”

Other VCs share this view. But the creation of a viable pan-European market will take time and will almost certainly come too late for those VCs looking for confidence-boosting exits in the next 18 months. For the time being, trade sales remain their best bet.

The London-based private equity firm has raised £16.1m, or 4.4x its original investment, from listing Scottish open cast miner ATH Resources on AIM in June. Alchemy invested £3.1 million (€4.7 million; $5.7 million) in ATH in May 1998 and acquired another Scottish coalmine operator, Law Mining in a £1.5 million follow-on investment in November 2003. The AIM listing priced the ATH stock at £1.36 per share, valuing the company at £40.5 million. The flotation is Alchemy's second IPO this year, following the AIM flotation of IT software provider Civica in March.

Balta Industries, a Belgian carpet manufacturer, has agreed to sell the majority of its shares to Doughty Hanson, the London-headquartered private equity firm, for €600 million ($728 million). The firm will acquire a 70 percent stake from the Balcaen family, who are retaining a 20 percent interest in the business, with management holding the remaining ten percent. The deal is the second for Doughty's Paris office, which was launched under Yann Duchesne in January 2003, following the acquisition of French industrial battery maker Saft from Alcatel for €390 million in October last year.

Doughty has also completed the IPO of Umbro, the UK sportswear maker, on the London Stock Exchange, receiving £42 million in dividends and from the redemption of preference shares.