The Confidence Index of Venture Capital Funds Rises, Central European Investors Optimistic for 2024

The latest sentiment indicators in Central Europe indicate constant and growing confidence, with an increased share of respondents believing that 2024 will prove to be a good year for returns (86 percent, compared to three-quarters last year), resulting in a rise in the confidence index for the third consecutive half-year. The increase is not as sharp as in the other two periods of such growth covered by the survey following the economic downturn in 2008 and 2012.

Respondents are more optimistic regarding the economy: specifically, the number of respondents expecting improved results has tripled and now stands at 42 percent. At the same time, a similarly good sign is that the number of respondents expecting a deterioration in the situation has halved (20 percent compared to 40 percent in the summer of 2023). Liquidity is very likely to improve, and nearly a third of respondents (29 percent) expect that the availability of financing through borrowing will also improve, which is double the amount in the previous survey.

All of the above results in increased expectations regarding market activity, with half of the respondents (49 percent) expecting an increase in the number of transactions in 2024, which is double the amount from the previous half-year and significantly higher than the low 6 percent recorded in the summer of 2022. Furthermore, only 14 percent of respondents expect a decline in activity, which is significantly less than the previous half-year when a third of respondents expected a decline in activity. The transaction pipeline appears healthier, and nearly half of the respondents (45 percent) believe that there are more realizable opportunities today than there were three months ago.

– It is great to see that confidence has returned in a big way after an extended period of exceptional difficulties. While the increase in optimism is more moderate than in previous periods, stable growth testifies to the experience of investors in Central Europe, who, given their experience in past cycles, are more pragmatic in today’s situation – stated Ante Salopek, Senior Manager in Deloitte’s Financial Advisory Department.

– A cautious increase in confidence instills security and indicates that transactions will be conducted thoughtfully this year, with strong collaboration with advisors and quality preparation of businesses for sale being of exceptional importance, supported by flexible financial resources aimed at maintaining the necessary agility in regional fast-growing companies – added Salopek.

ESG criteria are increasingly being embraced in the region, with three-fifths of respondents having begun to define future commitments and goals in the area of climate neutrality (42 percent) or have already implemented related policies (18 percent).

– It is clear that private equity funds in Central Europe are embracing ESG criteria as value drivers, as yesterday’s advice becomes today’s legislation, and measures in sustainability and inclusivity affect valuations. Experienced private equity funds have enough knowledge to share in this crucial area and lead by example for others – emphasized Salopek.