UK-based companies raised €766 million (£668 million) through 119 deals, which is a 4 per cent decline in capital invested and a 29 per cent decline in deal flow compared with the same period last year, according to a report from Dow Jones VentureSource.
Across Europe there has been a similar drop in activity. The report finds European venture-backed companies raised €2.2 billion through 447 deals between January and June, a 28 per cent decline in deal activity from a year earlier.
Capital raised and the number of European venture-backed initial public offerings (IPOs) was up slightly on last year, reaching their highest six-month level since the first half of 2007. However, the nine flotations, which raised a total of €611 million in the first six months of this year, were still some way off the 27 IPOs that raised €723 million in the first six months of 2007.
Consumer web companies proved to be the star sector during this period, with a year-on-year increase in investment of nearly 150 per cent. The lion’s share of capital invested went to web companies, including social media, entertainment and search start-ups.
Consumer web start-ups raised €522 million for 72 deals, more than triple the capital raised and a 13 per cent increase in deal flow compared to the same period last year. This marks the sector’s best half-year for investment since the first half of 2000.
On the other hand, the information technology (IT) industry recorded its lowest ever half-year deal count this period, with deal flow down by 35 per cent. Software maintained its position as the largest IT segment, attracting 69 per cent of deals and 55 per cent of investment.
The healthcare industry, which was one of the most active and largest investment areas for venture capital throughout most of the past decade, was also hit hard by a loss of favour from VCs. In the first half of this year, investors put €628 million into a record low deal count of 92 deals.
Anthony Sheldon, research manager of Dow Jones VentureSource comments, ‘Worries about Europe’s sluggish and uneven economic recovery are key reasons for caution among venture capital investors. In such a febrile atmosphere, venture investors may look for a smaller number of de-risked later-stage investments in core industries, leaving less for investments in new enterprises.’
Of the other European nations, France came in at second place, yet it also witnessed a decline in investment and activity in the first half of this year. Investment declined 18 per cent to €315 million and deal flow fell 16 per cent to 114 deals.
Due in large to the online private sales club Privalia deal in the first quarter of 2011, Spain came third by investment but fifth by deal flow. Investment increased threefold to €139 million and deal flow rose 32 per cent to 25 deals.
Germany came in fourth by investment but third by number of deals despite recording a decline in investment. German companies raised €240 million through 54 deals – a 27 per cent decline in investment and a 41 per cent decline in deal flow on the same period last year.