European venture market slows in Q3

30 November 2004

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The European venture capital market slowed down slightly in the third quarter of 2004, according to new figures released by Ernst and Young and VentureOne.The European Venture Capital Report shows that Q3 was a mixed quarter for European venture, with declines in the UK market, as well as in the IT and healthcare sectors, but growth in the French and Irish markets, as well as in early-stage investments and internet ventures. The latest edition of the report was compiled from interviews conducted with CEOs and CFOs of venture capital firms, and found that 224 deals worth a total of E769.8m took place in the third quarter of the year. This represents a 9% decline in capital invested and 13% decline in number of deals since the same quarter of last year, and respectively 27% and 17% declines since the second quarter of this year.However, total deal value for the first nine months of the year stood at E2.558bn, slightly higher than the figure of E2.542bn for the same period last year.The UK venture market saw a heavy decline from the previous quarter, with total UK deal value down by 37%. The German market saw a slight decline, but France and Ireland posted particularly strong quarters, with total capital investment up by 28% and 33% respectively.Europe-wide, the IT and healthcare sectors declined, with total investment in the latter dropping 40% from a very strong second quarter. However, the healthcare sector also saw the largest single deal, the E43.3m investment in Arakis, the UK-based developer of therapeutics. The products and services industries had a positive quarter, showing a renewed interest in internet companies.The quarter also saw some growth in early-stage funding, with seed- and first-round deals representing 31% of total venture capital investment and 35% of the total number of deals - the highest percentage in three years.