Venture capital investment in Europe dips five per cent to €1.2bn in Q3 from last year

IT companies accounted for just 85 deals and €387m in investment, 23 per cent below the €500m invested in 114 IT deals during Q3 2007, which mark the lowest quarterly deal and investment totals for the industry since Dow Jones VentureSource began tracking European venture investment in 1999.

'Much like in the US, Europe's IPO market is virtually non-existent and the turmoil in the broader economy is keeping many corporations from acquiring venture-backed companies,' said Jessica Canning, director of global research for Dow Jones VentureSource. 'This is putting pressure on venture capitalists who are being very selective in the number of deals they are doing and kinds of companies they are backing. The pullback in the European IT industry is a trend that is being mirrored closely in the US, where IT deal activity also reached its lowest point in more than a decade during the third quarter.'

Healthcare investment in Europe fell 13 per cent to €312m in the most recent quarter, with 58 deals completed, from €360m and 61 deals in the third quarter of 2007.

Europe's energy and utilities industry saw record investment during the third quarter, with €192m put into 14 deals - €187m of that capital went to 13 deals in the renewable energy sector. The largest deal of the quarter was the €120m later stage round for wind turbine maker WinWind of Helsinki, Finland.

The business and financial services industry posted its best quarterly investment total in nearly six years, with €207m put into 27 deals during the third quarter, an 18 per cent increase over the €176m invested in 26 deals during the same period last year.

By stage, the bulk of capital investment in the latest quarter was directed towards second and later rounds. Later stage rounds accounted for 52 per cent of Europe's total quarterly investment, with €616m put into 66 deals, up from a proportion of 49 per cent last year. Second rounds accounted for 22 per cent of the total with €255m put into 46 deals, flat compared to last year, the research found.

Seed and first rounds accounted for 24 per cent of investment in the most recent quarter, with €284m invested in 96 deals, down from €342m last year (or 28 per cent of total capital investment) went to 102 seed and first round deals.

The overall median deal size ticked up slightly to €3m in the most recent quarter from €2.9m in the third quarter of 2007.

By geography, the UK watched venture investment fall 27 per cent to €315m in the most recent quarter from €431m in the third quarter of 2007, with the number of deals completed dropping to 62 from 80. The UK accounted for 30 per cent of Europe's quarterly deal total.

France saw venture investment climb 13 per cent to €212m in the third quarter, while deal activity dropped slightly to 52. Venture investment in Germany was down 18 per cent compared to the third quarter last year, with €132m invested in 30 deals.

Investment in Sweden tripled to €54m in the most recent quarter from €18m in third quarter of 2007, with ten deals completed. Finland saw its venture investment total skyrocket to €126m for the quarter with just two deals completed in total.

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