Venture capital deals plummet across Europe

Michael Bow
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VENTURE capitalists (VC) went cold on Europe in the last three months of 2012, as dealmakers cut investments in European-based start up businesses by more than a quarter, data out yesterday revealed.

VCs poured €967m (£616.4m) into European firms in the fourth quarter, a 26 per cent decline on the same period last year, according to Dow Jones VentureSource. The number of deals also slipped 22 per cent between October and December.

The bearishness of VCs at the end of last year stands in stark contrast to European public equity markets, which roared to their highest levels since before the financial crisis.

Despite this, mergers and acquisition activity across the continent was even more subdued last year, with 145 exits garnering €4.7bn, down an eye-watering 45 per cent on the figures in 2011.

This is the lowest recorded since VentureSource – which tracks more than 20,000 private investment firms around the world – started collecting European data in 2000.

“Investors appear trapped in their current investments, needing to wait longer to recoup their financial returns while at the same time lacking funds to fuel new ventures,” head of research Anne Malterre said.

The figures also reveal the UK as the venture capital hotspot of Europe, beating off France and Germany with UK firms getting €1.4bn of VC backing compared to €822m for Germany and €721m for France.

While the traditional hunting ground of VCs – like healthcare and energy – diminished last year, interest in social media and online shopping firms boomed to become the most popular sector for VC investment, attracting €1.3bn over the year.