European venture capital funds have overtaken their North American counterparts on total returns, according to new benchmark data published by Invest Europe this week.
The finding challenges a long-held assumption in the LP community that European venture is structurally inferior to its US equivalent.
The report, based on data from Cambridge Associates, finds that European funds delivered a net total value to paid-in capital (TVPI) of 1.99x – marginally ahead of the 1.95x recorded by North American funds.
Over ten and 15-year horizons, the gap widens further.
European VC funds generated net internal rate of returns (IRRs) of 16.59% and 17.06% respectively – ahead of North American funds over both periods, in both euros and dollars.
Experienced fund managers outperform
One finding likely to inform LP due diligence is the steep learning curve the data reveals.
Established fund managers – those on their fifth fund or beyond – recorded a TVPI of 2.66x, against 1.62x for managers on their first or second fund.
Early-stage funds also outperformed late and multi-stage vehicles on TVPI, returning 2.09x against 1.70x.
The report notes, however, that European funds take longer to distribute capital than their North American peers – 6.4 years on average against 4.4 years.