SMP introduces the first survey on market standards for European venture capital transactions
Berlin - Together with three other European law firms, Schnittker Möllmann Partners (SMP) has carried out a survey of market standards for venture capital transactions in Germany, France, Great Britain and Switzerland.
For this purpose, the law firms evaluated around 500 financing rounds in the period from 2017 to 2019 based on 53 separate categories.
Convergence of market standards
The evaluation revealed a broad convergence of deal terms in the documentation of financing rounds across the European jurisdictions. "The survey of market standards shows that European investors largely agree on the market standards for startup investments," comments Benjamin Ullrich, Partner at SMP. In case of about 90 percent of the deal terms, an alignment amongst European jurisdictions as well as the US and can be observed. "On the one hand, international mechanisms have emerged in the venture capital market to solve similar problems - for example when it comes to ensuring that founders stay on board. On the other hand, due to maturity, size and professionalism of the market, the United States set standards that also have an impact on European jurisdictions," says Benjamin Ullrich.
In Germany few investments are tied to milestones
"It is remarkable, however, compared to France, Great Britain and Switzerland, that investments in Germany are rarely made dependent on the achievement of milestones," adds Adrian Haase, Senior Associate at SMP. "While such milestone mechanisms used to be more common in Germany, the German VC market has turned in recent years. We assume that the reason for this lies in the significantly increased supply of capital, this applies at least in the early stage."
In addition to Schnittker Möllmann Partners, the following law firms were involved in the evaluation: Withers Tech (England), Viguié Schmidt & Associés (France) and Wenger & Vieli (Switzerland).