Further slide in corporate venturing

Direct corporate venture investment in Europe has fallen by a further 38 per cent in 2002 according to the latest report from EVCA.

European corporate venture capital activity has slowed further with only biotechnology breaking the downward trend. The latest report compiled by the European Venture Capital Association (EVCA), which measures the level of investment by 82 funds across Europe, found that only E337m was invested in 2002, down 38 per cent from the E544m invested in 2001. The number of financings was also down from 474 in 2001 to 377 last year, a decline of over 20 per cent. 

 

Also notable was that European corporate venturers raised only E58m for their funds from independent sources in 2002, a significant decline of almost 70 per cent from 2001, when E179m was raised. Write-offs accounted for 50 per cent of divestment at cost, as corporate funds continued cleaning up their portfolios. Trade sales accounted for 25 per cent and sale of quoted equity added a further 16 per cent.

 

54 per cent of the capital deployed was invested in start-ups with 41 per cent going to expansion stage companies. The major sectors for investment were computer software, consumer products, telecommunications hardware and biotechnology, which together accounted for 49 per cent of the investments and 51 per cent of the invested funds during the year. 32 biotechnology companies received funding from corporate funds compared to only 19 in 2001. 

 

“It is not surprising to see that the 2002 EVCA data confirms a slowdown in European corporate venturing investment as this mirrors what has happened with most of the European venture industry,” said Alan Duncan, a director at Prelude Ventures and a member of EVCA’s High-Tech Committee.

 

One of the positive aspects to emerge from the data is a rise in deal syndication. 36 per cent of the 377 deals involved a level of syndication, comparable with the level seen in 2000 and an increase from 26 per cent in 2001. “It is encouraging to see that levels of syndication reported have increased,” confirmed Duncan.

 

In this, the 3rd Corporate Venturing European Activity Report, German corporates represented 26 per cent of the 82 survey participants and German companies accounted for 47 per cent of the value of the deals during the year.