European Venture-Capital Industry Continues Decline

Venture-capital investment into European companies continued its year-on-year decline according to figures published by Dow Jones VentureSource Monday.

Across all sectors during 2012 venture capitalists put €4.4 billion ($5.9 billion) into a total of 1,074 deals, a slight drop of 9% in capital invested and 11% in the number of deals completed in 2011.

The report also shows M&A activity is at its lowest since VentureSource started tracking data in Europe.

The report makes for gloomy reading. With fewer exits investors are having to wait longer for recoup their financial returns. At the same time the general contraction in the market means venture-capital firms are finding it harder to raise funds.

Taking the broadest possible interpretation of the tech sector (Communications and Networking, Electronics and Computer Hardware, Semiconductors, Software, Consumer Information Services, and Media and Content) the good news is that during the period 2000 to 2012, while both the number of deals and deal value fell dramatically, the average deal size has slowly climbed since 2003.

One bright spot was the Consumer Services industry which in 2012 passed healthcare in receiving the most investment capital. Of that more than half went to social media, entertainment and online shopping companies. Those companies raised €779 ($1,047) million for 186 deals, a rise of 4% in investment and 9% in deals completed from 2011.

Within Europe the U.K. remained first among equals, raising €1.4 billion for 295 deals, a 5% decline in investment and a 10% drop in deals from 2011.

Germany had a strong year for venture-capital investment — €822 million for 189 deals, a 48% rise in investment and a 16% increase in deal flow. France dropped to third place, raising €721 million for 202 deals, a 7% decline in investment and a 17% drop in deals completed. The Netherlands was fourth, with companies there raising €207 million for 25 deals, a 9% increase in investment despite a 22% decline in deals.

Over the whole of 2012, 145 companies exited via M&A, a drop of 30% from the 2011 figure and the lowest count for Europe since VentureSource began tracking the region in 2000. M&As garnered €4.7 billion over the course of the year, a fall of 45% from the €8.6 ($11.6) billion amassed during 2011.

By contrast, as we reported earlier, exits for just Israel’s tech sector topped €4.09 billion.

Author: Ben Rooney
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