Fewer companies attracting more venture capital cash

European companies are attracting more investment from venture capital firms despite less of them being backed, new statistics show.

The second quarter of 2012 has seen €1.3 billion (£1 billion) committed through 273 venture capital deals, Dow Jones VentureSource reveals. The figures represent a 14 per cent increase on cash allocated but a 20 per cent dip in deal volume over the same period in 2011.

Further findings show that, over the three month period, 38 European venture-backed companies were acquired, a 34 per cent fall in deals over the same 2011 timing. Less than half the number of businesses went public (three).

Combined with the first three months of the year, some 550 deals accounted for €2.2 billion of development capital, a 7 per cent decline in value and 10 per cent fall in volume.

The UK has maintained its holdings as the preferred choice for VC investments during the second quarter. British firms collected €504 million from 71 deals, a surge of 75 per cent in value despite a 15 per cent fall in volume.

According to the VentureSource report, European findings largely mirrored that of US investment figures, with internet and software companies ‘faring well’ while the healthcare and energy industries posted declines.

Anne Malterre, European research manager at Dow Jones VentureSource, says that while deal activity fell, investment grew as the ‘lacklustre’ exit environment kept companies private longer.

She adds, ‘As companies age, they often need larger financing rounds to continue, which boosts the amount invested.’

However, she says, ‘We saw deep declines in renewable energy, in part due to the UK’s feed-in tariff cuts, and in healthcare. There were some bright spots, however, as VCs increased the percentage of deals done for early-stage companies and interest in online start-ups remained strong.’

Consumer services such as internet posted significant gains over the same period in 2011. A total of €493 million was raised across 72 deals, more than double the €239 from the same period in 2011 despite only one more deal being closed.

Some 62 per cent of deals in the second quarter were for early-stage businesses, a rise of 4 per cent from 2011. These firms contributed 32 per cent of capital provided, the same as the previous year.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

Related Topics

Venture Capital