Venture capital investment outside the US up five per cent in 2008

Venture capitalists invested more than $13.4bn in 1,416 deals for emerging companies in Europe, Israel, Mainland China and India last year.

This is nearly a five per cent increase over the $12.8bn that venture capitalists invested in 1,711 deals outside the US in 2007 and comes despite a 15 per cent drop in annual venture investment in Europe. Still, the US remains the world's leading destination for venture capital, accounting for 2,550 deals and $28.8bn in investment in 2008.

Jessica Canning, director of Global Research for Dow Jones VentureSource, said, "The venture capital industry continues to rapidly globalise as investors are eager to find and tap new areas of innovation, especially in emerging economies like China and India. What's most notable is that the growth in international investment is not being fuelled solely by IT, which is traditionally the sweet spot for venture capitalists, but also by energy-related investments. Investments in energy totalled nearly $1.4bn in 2008 and now account for more than 10 per cent of international venture investment. Much of this can be attributed to the global spike in energy prices we saw in 2008 and the venture community's championing of renewable and clean energy technologies."

According to VentureSource's results, Europe saw a late-year pullback in venture investment which led to an overall annual decline of 15 per cent as investment fell from $7.6bn in 1,107 deals in 2007 to $6.5bn in 881 deals in 2008. This marks Europe's lowest deal count since VentureSource began tracking the region in 1999. The region ended the year on a low note as investment fell 38 per cent from $2.1bn in the fourth quarter of 2007 to $1.3bn in 2008, its lowest quarterly total in more than four years. Europe did, however, see a surge in energy and utilities investment. The data shows that venture capitalists put a record $816m to work in 59 of these deals in 2008, up 89 per cent from the $431m invested in 52 such deals in 2007.

China saw venture capitalists invest a record $4.2bn in 245 deals in 2008, up from $2.8bn in 290 deals in 2007. The region saw investment top $1bn every quarter in 2008 except for the fourth quarter, which saw investment tumble to $716m in 54 deals, 9 per cent below the $787m put into 84 deals in the final quarter of 2007. IT investments led the way as investors put $1.6bn into 86 such deals in 2008, up 60 per cent over the $1bn invested in 117 IT deals in 2007. China's consumer services industry saw record investment in 2008 with $1bn put into 50 deals, up 57 per cent from $652m invested in 51 deals in 2007. According to VentureSource, the median deal size in China is now the highest in the world - reaching a high of $10m in the region in 2008.

Venture capitalists put a record $1.9bn into 210 deals for companies in Israel in 2008, up 19 per cent over the $1.6bn put into 227 deals in the region in 2007. Of that, $1.3bn, or 68 per cent of all capital investment, went into 132 IT deals, nearly 30 per cent more than the $1bn invested in 153 such deals in 2007. Healthcare companies in Israel attracted $331m in 2008, an increase of 4 per cent over 2007. Energy and utilities companies garnered a record $167m, up 149 per cent over the $67m invested in the industry in 2007. The data shows that the median size of a venture deal in Israel also set a record in 2008 and now stands at $5m.

Venture capital investment in India also set a record in 2008, though its growth was minimal compared to prior years, according to the stats. Investment in India-based companies reached $864m in 2008 with 80 deals completed, up some 3 per cent from $842m invested in 85 deals in 2007. Unlike China and Israel, which have more firmly established business infrastructures, India saw the majority of venture investment go to its business and financial services companies, which garnered a record $368m in 26 deals in 2008. That is more than double the $144m the industry saw invested in 20 deals in 2007. India's IT industry saw investment fall 45 per cent from $319m invested in 32 deals in 2007 to $176m in 22 deals in 2008. Energy and utilities investment in India climbed some 75 per cent in 2008 to $70m. India was the only region to see its deal size hold firm year-over-year, remaining unchanged at $8m in 2008.

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