Dow Jones VentureSource Finds 25% Drop in Total Deal Flow Balanced Out by
25% Jump in Median Deal Size; U.K. Sees Record Investment, Accounts for 46%
of Region's Total
LONDON and NEW YORK, May 13 /PRNewswire/ -- It's feast or famine for
entrepreneurial companies in Europe as venture capitalists continue to
invest in the region-to the tune of euro 1.14 billion in the first quarter
of 2008- but are backing far fewer technology companies, according to the
quarterly European Venture Capital Report released today by Dow Jones
VentureSource (http://venturecapital.dowjones.com), the venture industry's
premier data provider.
In fact, the 180 deals completed in the quarter mark the lowest overall
deal total on record and are 25% less than the 235 deals completed in the
first quarter of 2007. Even so, overall investment ticked up nearly 2% as
venture capitalists put more money into these deals, pushing the median
size of a venture round in Europe up 25% to a record euro 3.3 million.
"Venture capitalists are being quite selective about the kinds of
European companies they invest in-and for good reason," said Jessica
Canning, Director of Global Research for Dow Jones VentureSource. "The IPO
market is virtually nonexistent in Europe, and with ongoing turmoil in the
global economy, mergers and acquisitions are harder to come by. So, we see
two effects: the first, obviously, is a continued slowdown in venture
capital deal activity. The other result is that VCs are choosing to back
only the most promising companies and ensure these companies have enough
capital backing to be competitive and survive what may be a long road to a
liquidity event."
Abysmal Quarter for IT; Medical Devices, Energy See Record Investment
According to the report, information technology (IT) was the only major
industry in Europe to see a substantial drop, as deal activity plummeted
48% to just 80 deals, by far the lowest total on record. Overall, Europe's
IT investment fell 22% to euro 423 million, marking the second down quarter
in a row for the industry.
The only seemingly bright spot was in the Web-centric information
services sector, which saw investment climb 27% to euro 141 million in the
first quarter despite only 17 deals being completed (compared to 41 in
first quarter 2007). But even this looks gloomy when you remove the nearly
euro 54 million that went into the second round for online advertising
network Adconion Media Group of Germany, which was also the largest overall
deal in Europe in the first quarter.
Investment in European healthcare companies climbed 6% to euro 430
million, as the first quarter of 2008 saw 56 deals completed, 11 more than
last year. According the report, the majority of this growth was in the
medical device sector, which saw a record euro 130 million put into 18
deals, a 7% increase in capital investment. The normally robust
biopharmaceuticals sector saw deal flow remain steady with 33 deals
completed in the first quarter but investment in the sector fell 6% to euro
267 million. One of the largest health care deals in Europe in the first
quarter was the euro 33 million first round for Swedish biopharmaceutical
company Albireo.
The report also showed that Europe's business, consumer and retail
category posted a strong first quarter with 28 deals garnering euro 161
million, a 164% increase over the euro 61 million invested in 11 similar
deals in the first quarter of 2007. Driving this growth was a spike in
consumer/business services investments. The sector saw 20 deals close in
the first quarter and more than euro 131 million invested-nearly six times
the euro 24 million put into the space in the first quarter last year. One
of the largest deals in this segment was the nearly euro 37 million
later-stage round for MoneyExpert, a financial services information
provider based in the United Kingdom.
Elsewhere, the data showed that Europe's energy sector saw record
investment as euro 111 million was put into 12 deals in the first quarter-a
44% increase over amounts invested in the same quarter last year. Among the
largest deals in this area was the euro 40 million later round for German
solar company Odersun.
"Our data shows that VCs are eager to tap the next wave of innovative
European companies in areas like energy production, medical devices and
business and consumer services," added Ms. Canning. "But, given today's
tight liquidity markets, they're focusing the majority of their capital
resources toward helping develop and expand later-stage companies and best
position them for an exit."
Percentage of Early Deals Up But Later-Stage Companies Get the Big
Rounds
This trend could be seen in the higher proportion of early round
financings in Europe in the first quarter. In fact, the data showed that
seed and first rounds accounted for 45% of Europe's deal activity, up from
40% in the first quarter of 2007, while second and later-stage rounds saw a
corresponding dip.
As stated, the overall median deal size reached a record euro 3.3
million but later-stage companies benefited the most. The median deal size
for a later-stage company jumped 70% from euro 3.5 million in the first
quarter of 2007 to euro 6 million in the most recent quarter.
Geographic Perspectives
-- Venture capital investment in the United Kingdom jumped 51% compared to
the first quarter of 2007 with a record euro 527 million invested in 73
deals. The U.K. accounted for nearly 46% of all investment in Europe in
the first quarter.
-- In France, investment fell 45% to euro 160 million while deal activity
dropped 38% to 34.
-- Capital investment in Germany slipped only 3% to euro 152 million even
though deals were down 45% to 16 in the first quarter.
-- In Sweden, capital investment rose 54% to euro 88 million and the deal
count rose to 18.
-- Deal flow was cut in half in Denmark as only seven deals closed, but
garnered 14% more capital with euro 64 million invested.
For more information or to arrange a personal demonstration of Dow
Jones VentureSource, visit http://venturecapital.dowjones.com or call (866)
291-1800 (in the U.S.) or +44 (0) 203 217 5176 (in Europe).
The investment figures included in this release are based on aggregate
findings of Dow Jones proprietary European research. This data was
collected by surveying professional venture capital firms, through in-depth
interviews with company CEOs and CFOs, and from secondary sources. These
venture capital statistics are for equity investments into early-stage,
innovative companies and do not include companies receiving funding solely
from corporate, individual, and/or government investors. No statement
herein is to be construed as a recommendation to buy or sell securities or
to provide investment advice.
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SOURCE Dow Jones Financial Information Services
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