French VC investment bucks trend

According to new figures, France stood out in the first quarter with an increase in investment activity from an otherwise still shrinking European market.

European venture capital investment in Europe has fallen by approximately one-third in the first three months of 2002, according to a new survey looking at European Q1 VC investment. However, the same period has seen France cement its position as the region’s second-largest venture capital market with a 24 per cent increase in investment.

The survey, published by VentureOne in association with Ernst & Young, shows that European VC investment fell in Q1 2002 to E1.2bn, a 30 per cent drop on the figures for Q4 and a continuation of the trend that has seen investment fall by similar levels over the past three quarters. The number of deals completed also fell sharply, although the average deal size increased from E2m to E2.4m.

There was no discernible trend in investment patterns across Europe as a whole. Investment in France rose 24 per cent to E242m, the second highest investment total in Europe, while UK firms recorded a 2 per cent increase in the same period. The UK and France couldn't compensate for substantial declines in Germany and Sweden, as well as in smaller markets such as Ireland, Spain, and Belgium.

Steve Harmston European research director at VentureOne said the disparity between the figures represented different evolutions of investment in Europe. 'Much of the investment in Germany and Sweden over the last few years came from firms that were new to venture capital. In this more challenging environment, many are struggling or ceasing their investments entirely. Firms in the UK and France, on the other hand, have a much longer history of venture investment. They've experienced downturns before and are taking advantage of numerous opportunities to invest in solid companies at far lower valuations.'