Development of the Hungarian Venture Capital and Private Equity Industry over the Past Two Decades

Abstract

In Hungary, the previously non-existing venture capital and private equity industry has strengthened over the past two decades, and it has become one of the leaders of the CEE region. Approximately 90% of the capital allocated to investments overall were raised from private sector investors. The volume of VC & PE fluctuated cyclically following international capital market cycles and the changes of domestic economic policy. The Hungarian market became a preferred area for foreign capital investors in the last third of the 1990s. Later on its position became even more favourable due to Hungary's accession to the EU. Between 2007 and 2008 the Hungarian market, similarly to the whole region, earned also profit from a transitory situation at the beginning of the crisis when the investment problems in Western Europe did not extend to the CEE region for some time. From 2009 on, however, the crisis in CEE also resulted in a very serious drop in investments, in spite of the significant amount of uninvested capital accumulated in recent years. In addition, the crisis affected the already weakened Hungarian economy more seriously than the other parts of the region, which was reflected by the drop in investments in 2010.

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