European VC deals hit record low — depressing for startups
European venture capital firms are backing the fewest companies on record. They reduced their bets to just 897 companies last year, the lowest number since 1999 when research group VentureSource began tracking investments there.
When they do invest, however, European venture capitalists are putting in more money than previously. Last year, they invested EUR 4.56 billion, a two percent rise from 2006, and the fourth year of consecutive increase.
One reason for the reduced activity is the relatively lackluster market for mergers and IPOs in Europe. It is more difficult to bring a company to a stage where it returns profits, which explains why larger amounts of money are invested to get them there. They need staying power to turn into successes. This contrasts with the U.S., where last year the merger market was strong.
The number of European venture-backed companies going public dropped to 38 from 89, while M&A deals fell 38 percent to 136, the lowest figure this decade, according to VentureSource. See all the stats in this Excel spreadsheet (downloads file), by the way. Also in Europe, hedge funds don’t invest in start-ups like they do here. Biopharmaceutical investments have taken a particularly strong hit, according to VentureWire, which is owned by Dow Jones, the company that also owns VentureSource. Lately, U.S. investors have been eyeing Eastern Europe, however.
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About the Author, Matt Marshall
Matt launched VentureBeat in September of 2006, with the realization that no one else was covering the entrepreneurial and tech innovation scene with the velocity or depth that he was. Prior to founding VentureBeat, he covered venture capital for the San Jose Mercury News from 2001 to 2006. In 2002, Matt was awarded "Journalist of the Year" by the Northern California Society of Professional Journalists. Prior to working at the Merc, he was a correspondent for the Wall Street Journal in Bonn, Germany from 1995 to 1998, and a writer for the Washington Post in 1994. Matt holds a PhD in Government and an MA in German and European Studies from Georgetown University. In addition to VentureBeat, Matt is also the Executive Producer of DEMO, the leading launchpad event for emerging technologies.
