Following a slowdown in the second quarter, venture capital investments in the international markets rose back to levels seen in the first quarter of the year, according to data from industry tracker Dow Jones VentureSource.
Venture capitalists put USD1.8bn to work in 297 deals in Europe, Canada, Israel, China and India in the third quarter. This is up from USD1.5bn invested in the second quarter, but on par with the USD1.9bn invested in the first quarter.
“Even as individual regions see dramatic ups and downs quarter over quarter, overall international investments have been steady in 2009,” says Jessica Canning, director of global research for Dow Jones VentureSource. “This overall consistency is a promising sign as investors chart their course after the global downturn in 2008.”
In the US, venture investors put USD5.1bn into 616 deals, a slight drop from the second quarter and a 38 per cent decrease from one year ago.
According to Dow Jones VentureSource, Europe garnered USD998m (EUR730m) in 201 deals during the third quarter of 2009, up 23 per cent from the previous quarter which was the lowest on record since Dow Jones VentureSource began reporting on the region in 2000. The third quarter’s total is still a 48 per cent drop from the USD1.9bn invested in 312 deals during the same period last year.
“In Europe, the lag in the liquidity and fundraising markets has investors spending less, but spending wisely,” says Arno Castanet, a research manager in Dow Jones VentureSource’s London office. “In information technology, investors are putting more capital to work in the Web-heavy information services sector and in healthcare they’re favoring medical devices.”
The IT industry attracted the largest proportion of investment with USD425m (EUR311m) invested in 87 deals in the third quarter, down 30 per cent from the same period last year. Investment in the Web-heavy information services sector carried the IT industry as investors put USD173m (EUR127m) to work in 22 deals. Meanwhile, the software sector hit a record low with just USD72m (EUR52m) invested in 35 deals this quarter.
Investors put USD296m (EUR216m) into 41 healthcare deals in Europe during the most recent quarter, a 41 per cent decline from the same period last year. For the first time, the medical devices sector attracted more capital than biopharmaceuticals as investors put USD158m (EUR116m) into 21 medical device deals and USD122m (EUR89m) into 18 biopharmaceuticals deals.
Europe’s energy and utilities industry was up 114 per cent from the previous quarter, with USD144m (EUR106m) invested in 22 deals. The industry, however, is still down 54 per cent from a year ago. In the third quarter, all investments in energy and utilities went to companies in the renewable energy sector.
According to the data, the size of venture deals has decreased around the world since 2008. In Europe, the median size of a venture capital deal dropped 30 per cent from USD3.7m (EUR2. m) in the third quarter of 2008 to USD2.6m (EUR1.9m) in the most recent quarter. While the median in Israel is now USD5.2m, a 31 per cent decrease from 2008, it has steadily risen every quarter since the first quarter of 2009, a promising trend for investors and their companies.
The median sizes of deals in India and Canada stood at USD3.6m and USD4.2m, respectively, year-to-date. In China, the median deal size was USD7.4m after the first nine months of 2009.
The median deal size in the US dropped from USD7m a year ago to USD5m in the most recent quarter.
