Europe’s venture capital industry saw deal activity and investment slow in the third quarter of 2008, according to Dow Jones VentureSource.
Europe’s venture capital industry saw deal activity and investment slow in the third quarter of 2008, according to Dow Jones VentureSource.
There were 209 deals completed, the second-lowest quarterly total on record, and EUR1.18bn invested, a five per cent drop from the EUR1.24bn invested in 245 deals during the same period last year.
European information technology companies accounted for just 85 deals and EUR387m in investment, 23 per cent below the EUR500m invested in 114 IT deals during the third quarter of 2007.
This marks the lowest quarterly deal and investment totals for the industry since Dow Jones VentureSource began tracking European venture investment in 1999.
Jessica Canning, director of global research for Dow Jones VentureSource, says: ‘Much like in the US, the Europe’s IPO market is virtually nonexistent and the turmoil in the broader economy is keeping many corporations from acquiring venture-backed companies. This is putting pressure on venture capitalists who are being very selective in the number of deals they’re doing and kinds of companies they’re backing. The pullback in the European IT industry is a trend that is being mirrored closely in the US, where IT deal activity also reached its lowest point in more than a decade during the third quarter.’
European software companies saw investment climb 24 per cent to EUR166m in the most recent quarter from EUR133m in the third quarter of 2007 despite seeing the number of deals completed drop to 44 from 51.
According to VentureSource, healthcare investment in Europe fell 13 per cent from EUR360m in the third quarter of 2007 to EUR312m in the most recent quarter with 58 deals completed, just slightly behind the 61 completed last year.
Investment in biopharmaceutical companies remained totally flat at EUR261m even though 39 deals were completed, 10 more than last year.
Conversely, the medical device sector saw its deal count drop to 14 in the most recent quarter from 26 in the third quarter of 2007 with investment down 49 per cent to EUR40m from EUR79m.
Europe’s energy and utilities industry saw record investment during the third quarter with EUR192m put into 14 deals – EUR187m of that capital went to 13 deals in the renewable energy sector.
Elsewhere, the report showed that Europe’s business and financial services industry posted its best quarterly investment total in nearly six years with EUR207m put into 27 deals during the third quarter, an 18 per cent increase over the EUR176m invested in 26 deals during the same period last year.
In the third quarter, the bulk of capital investment was directed to second and later rounds. Later stage rounds accounted for 52 per cent of Europe’s total quarterly investment with EUR616m put into 66 deals, up from a proportion of 49 per cent last year.
Second rounds accounted for 22 per cent of the total with EUR255m put into 46 deals, flat compared to last year.
Seed and first rounds accounted for 24 per cent of investment in the most recent quarter with EUR284m invested in 96 deals, down from last year when EUR342m (or 28 per cent of total capital investment) went to 102 seed and first round deals.
In the UK, venture investment fell 27 per cent to EUR315m in the most recent quarter from EUR431m in the third quarter of 2007 with the number of deals completed dropping to 62 from 80. The UK accounted for 30 per cent of Europe’s quarterly deal total.
Due to a strong healthcare investment, France saw overall venture investment climb 13 per cent to EUR212m in the third quarter while deal activity dropped slightly to 52.
Venture investment in Germany was down 18 per cent compared to the third quarter last year with EUR132m invested in 30 deals.
