Stellar return offers succour to European venture

DFJ Esprit has allayed fears that a subdued exit environment will make it hard for European venture capital firms to monetise their investments, sealing a 15x return following the sale of Zeus Technology.

The sale of UK-based software developer Zeus Technology to NASDAQ-listed trade buyer Riverbed Technology for $110 million – with the possibility of a further $30 million based on future performance – has delivered strong returns for the company’s venture capital backers.

DFJ Esprit reaped a 15x return on its investment in the business, while Scottish Equity Partners also toasted a “significant” return, according to a statement.

The deal comes as Europe-based venture capitalists expressed concern over the state of the exit market in Europe. Despite headline-making realisations such as the sale of voice-over-internet-protocol business Skype to Microsoft in May, a deal which generated a huge return for its venture and private equity backers, the subdued IPO market for smaller businesses in particular has meant some venture firms have struggled to exit their investments, according to industry participants speaking on condition of anonymity.

In addition, research from Thomson Reuters in April showed European venture capital firms collectively generated a 0.2 percent return over a 20 year time horizon, with a figure of -3.78 percent over 10 years.

The European venture industry has long lagged behind its US cousin. However, exits like the Zeus deal, or the January sale of DVD-rental business Lovefilm to online marketplace Amazon – another DFJ investment that also featured Balderton Capital and Index Ventures – have demonstrated that sizeable returns can be made.

DFJ led a recapitalisation of Zeus in 2004, with SEP investing in a series A financing round a year later. Both firms helped to build the company’s sales, marketing and executive teams, according to a statement, leading to it winning a slew of large contracts including television channels the BBC and ITV as well as Virgin Media.

Andrew Davison, a partner at SEP, commented: “When we invested in Zeus 6 years ago, we were confident that the company had some very strong technology, addressing a significant potential market opportunity. Since then, we have been very closely involved, helping to build a much more substantial business and a more robust strategy.”

Nic Brisbourne, a partner at DFJ Esprit added: “Over the last 7 years the Zeus team has done an incredible job, taking the company from restart to category-defining global leader.”

In separate news, venture capital firm Accel Partners has appointed Philippe Botteri from Bessemer Venture Partners to its London-based team. Botteri has 13 years’ experience in the technology sector, particularly in the increasingly important cloud computing segment of the market.