European VCs remain cautious

European venture capitalists invested E709m in the second quarter of 2003, 1.5 per cent less than in the first quarter, according to figures from Ernst & Young and VentureOne.

European venture capital investment has failed to mirror recent increases observed in the US, with both the number of transactions and the volume of investment dipping slightly in the three months to June, according to statistics published by Ernst & Young and VentureOne.


A total of E709m was invested in European venture capital transactions in the second quarter, a drop of 1.5 per cent on the previous quarter. The volume of transactions was down by three per cent, resulting in a slight increase in the average deal value, from E1.7m to E2m.


This compares with a 14 per cent increase, to $4bn, in US venture capital investment during the second quarter. The average amount invested was also up, from $5.9m (E5.3m) to $7.9m (E7m).


Despite the contrast to current US venture capital investment, the European numbers reveal grounds for optimism, according to the authors. “After a long period of decline, the European market stabilized in the second quarter. Historically, the European venture market has lagged the US slightly in its reaction to favorable news in the general economic and financial environment,” said Steve Harmston, VentureOne’s director of European research. “Given this, I expect the European venture market to build on its second-quarter stability and follow the lead of the US with an upturn in activity in the second half of the year.”


According to the new data, movements within specific sectors match trends seen in the US, particularly in terms of growth in the healthcare and software areas, and a sharp decline in communications and networking investment.


The total value of Euros invested in healthcare decreased slightly but healthcare deal flow increased by a quarter to 64 transactions, the majority of which were completed in biopharmaceuticals and medical devices. Biotechnology and drug discovery saw the quarter’s two largest deals: a E30m third round raised by Intercell, an Austrian developer of vaccines for cancer and chronic infections, and a E17m second round raised by Milan-based BioXell, a developer of immune disorder therapeutics.