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February 10, 2005

Meanwhile, Across the Pond...

Sarah Lacy

There's a disclaimer reporters like to use that goes something like this: "I know just enough about (fill-in-the-blank) to be dangerous..." I'm invoking it now, because I am not an expert on European venture capital. In fact, I probably don't even know quite enough to be dangerous. But the European venture capital numbers released by VentureOne and Ernst & Young today were interesting, so I'm blogging about them anyway.

For the first time since 2000, the annual investment in European venture-backed companies didn't fall, as 3.5 billion euros were invested in 2004. Meanwhile, the number of deals done decreased by 20%. Taken together, I'd think, "Hmm. Same money going to fewer deals? Guess that means not many early stage deals." And that would square with what I've been hearing about Europe since the downturn-- the history is in buyouts, not so much the risky, entrepreneurial deals folks in Isreal, Boston or Silicon Valley mean when they say, "venture capital."

Au contraire! Early stage deals comprised a third of all deals in Europe in 2004, compared to 28% in 2003. It was a trend that snowballed through the year, according to the press release, with 35% of all deals in the fourth quarter going to brand new companies. And the amount of money going to early stage deals was up 42% year-over-year. Early stage entrepreneurs were particularly fortunate in the United Kingdom, Denmark and Spain, where 40%, 44% and 55% of the deals, respectively, were early stage. Now, "early stage" is a relative term. It's possible these early stage deals are a little more fleshed out than a guy and a PowerPoint. But every new company that gets started is nonetheless good news for any economy.

And the trend could have legs. Like anywhere else, investors are following the money: European companies fetched "significantly higher" M&A prices last year and had the largest number of venture-backed IPOs in three years, according to the release.

08:56 PM

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