Mixed picture for European venture

The European venture capital market slowed down slightly in the third quarter of 2004, according to new figures released by Ernst and Young and VentureOne.

The European Venture Capital Report shows that Q3 was a mixed quarter for European venture, with declines in the UK market as well as in the IT and healthcare sectors, but growth in the French and Irish markets, as well as in early-stage investments and internet ventures. The report was produced by Ernst & Young and data provider VentureOne.
 
The latest edition of the report was compiled from interviews conducted with CEOs and CFOs of venture capital firms, and found that 224 deals worth a total of €769.8 million ($1.02 billion) took place in the third quarter of the year. This represents a nine percent decline in capital invested and 13 percent decline in number of deals since the same quarter of last year, and respectively 27 percent and 17 percent declines since the second quarter of this year.
 
However, total deal value for the first nine months of the year stood at €2,558 million, slightly higher than the figure of €2,542 million for the same period of last year.
 
The UK venture market saw a heavy decline from the previous quarter, with total UK deal value down by 37 percent. The German market saw a slight decline. But France and Ireland posted particularly strong quarters, with total capital investment up by 28 percent and 33 percent respectively.
 
Europe-wide, the IT and healthcare sectors declined, with total investment in the latter dropping 40 percent from a very strong second quarter. However, it also saw the largest single deal, the €43.3 million investment in Arakis, the UK-based developer of therapeutics. The products and services industries had a positive quarter, showing a renewed interest in internet companies this year.
 
The quarter also saw some growth in early-stage funding, with seed- and first-round deals representing 31 percent of total venture capital investment and 35 percent of the total number of deals – the highest percentage in three years. Steve Harmston, VentureOne’s director of European research, said that this interest is due to the return of 'exit opportunities in the form of mergers and acquisitions and initial public offerings'.