Venture capital (VC) investment in European companies fell to €1.21 billion (£920 million) in the fourth quarter of 2007, down 20.4 per cent on the same period of 2006, according to research institute Library House.

Venture capital (VC) investment in European companies fell to €1.21 billion (£920 million) in the fourth quarter of 2007, down 20.4 per cent on the same period of 2006, according to research institute Library House. This means total investment levels for 2007 are more than five per cent down on those seen in 2006, contracting from €5.64 billion to €5.27 billion.

The drop may be partly explained by an increasing difficulty in exiting investments, suggests the research. There were 72 trade sales of VC-backed companies in the second half of the year, compared to 132 in the first half, and the number of initial public offerings (IPOs) also fell.

Library House CEO John Owen comments: ‘The lack of European exits in the second half of the year is concerning, especially considering recent data showing that 2007 was a record year for venture-backed liquidity in the US.’

The UK saw its share of European VC investment fall to 22 per cent in the fourth quarter of 2007, its lowest share in two years. On an annual basis, the country took 27 per cent of investment in 2007, a drop of two percentage points on the previous year.

The most prolific investor in the fourth quarter of last year was the German Government-backed High-Tech Gründerfonds, which participated in nine funding rounds over the period, while French VC Sofinnova Partners led the pack in terms of amount invested, with total commitments of €91 million.