Current contract terms and market conditions for venture capital

The German venture capital market is facing significant changes, not least due to the ongoing effects of the financial crisis. While the statistics show little sign of a revival in the market since the slump in investment volumes seen in 2009, paradoxically there is something like a mood of optimism in the Internet sector in particular. This is due to a variety of trends and structural changes that are stimulating the market and which will be examined in more detail below. In particular, the impact of these developments on economically significant contractual terms and conditions in venture capital investment agreements will be discussed.

Effects of the financial crisis

The international financial crisis led to a significant slump in buyout business in the private equity market in 2009. The effects of the financial crisis were also felt in the venture capital market in the form of both lower fundraising and a significant decline in investment. According to statistics from the German Private Equity and Venture Capital Association, total VC investment in Germany almost halved in 2009 compared with the previous year.

In 2010, the market stabilized overall at around the same level as in 2009, with the final quarter of the year in particular seeing exceptionally high investment. This upturn initially appeared to continue in 2011, the first quarter of which significantly exceeded the prior-year quarter in terms of investment volume. From the third quarter of 2011, however, there was another decline in investment; as a result, the volume of venture capital investments in Germany in 2011 remained just below the already low level of the previous year. In the course of 2012 to date, there is still no statistical evidence of a trend reversal. In the first quarter of 2012, the figures for the good prior-year quarter were clearly missed in terms of investment volume, and the number of VC-financed companies also declined again. So after it looked like an upward trend for a while at the turn of 2010/2011, the current figures reflect a return of uncertainty in the market.