Europe and China see lowest venture deal counts on record

Cleantech isn’t the only investment area that’s bleeding green. According to the Dow Jones VentureSource, venture capitalists put $1.2 billion (€916 million) into 198 European companies in the third quarter of 2010. This is the lowest quarterly deal count for Europe since the company began tracking the region 10 years ago and represents a 25 percent drop from the third quarter of 2009.

Most of these deals were later stage investments (median deal size was up from $2.1 million in Q3 2009 to $2.6 million in the most recent quarter) in healthcare and consumer services. The IT sector, in particular, has suffered significant decline in investment and deal flow since the downturn. In Q3, €186 million was invested in IT, representing a 29% drop in deal flow and 11% drop in investment compared to the same period last year. Consumer services overtook IT as the second-largest investment sector. It’s not all bad news. The total amount invested in Europe actually rose by 6 percent over the same period last year, because of the increase in deal size.

China also saw a record low investment in IT companies with $46 million invested in eight deals, a 52 percent drop in capital invested from the same period last year. Overall, investment rose in the region by 32 percent over the same period last year to $603 million, with many of those deals happening in the business and financial services sectors. Investment in India remains strong, with $198 million invested in Q3, a 24 percent increase over the same period last year. China and India also saw increases in median deal size. In India the $8.7 million median was more than double the $4.1 million seen in 2009.

The US is seeing more deals but fewer dollars invested. Investors put $5.5 billion into U.S.-based companies during the third quarter of 2010, a 5 percent drop in investment but a 2% increase in deals from the same period last year. In general, investment has been increasing. $18 billion was put into 2,016 deals during the first three quarters of 2010, a 10 percent increase in both investment and deal activity over the same period last year. IT is still the top investment sector, followed by health care. Deals where VCs cooperate with angel investors are also on the rise. 68 deals were funded by both angel groups and venture capital firms, an increase from 59 co-investment deals in Q3 2009.

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