Tornado Insider Reports: Breakthrough in European High-Tech Venture Capital in 2003: Technology investments down to €2.5 billion, VC climate in Europe has stabilized

A total of €2.5 billion in venture capital funding was raised by 599 European companies in 2003, according to Tornado Insider Researchs deals database. Although this figure plummeted 50% compared to the €4.9 billion raised in 2002 through 743 deals, the ongoing downward trend since Q3 2000 ceased in 2003. Biotechnology deals are increasingly the sector of choice for venture capital investments in Europe. Average deal size again took a beating and is down 38% to €4.1 million for 2003.

Amsterdam, The Netherlands (PRWEB) February 2 2004---A total of €2.5 billion in venture capital funding was raised by 599 European companies in 2003, according to Tornado Insider Researchs deals database. Although this figure plummeted 50% compared to the €4.9 billion raised in 2002 through 743 deals, the ongoing downward trend since Q3 2000 ceased in 2003. Biotechnology deals are increasingly the sector of choice for venture capital investments in Europe. Average deal size again took a beating and is down 38% to €4.1 million for 2003.

The year started off poorly, with €565 million raised in the first quarter, a 45% drop off from Q4 2002. This presented the largest quarterly decrease ever recorded by Tornado Insider Research. However, it appears to have been the last spasm of the continent-wide recession in the VC market. Each consecutive quarter in 2003 showed an increase compared to the previous one, presenting the first solid upward trend in 30 months.

The European technology investment market has shown strong signs of stabilization throughout this entire year," said Niels Valkering, Head of Research at Tornado Insider. There has been a mean quarterly decrease of 9% since the start of the market slump in Q3 2000, with only Q2 2001 seeing a quarterly increase until 2003. However, each quarter outperformed the previous in 2003, with the upward trend topping off impressively in Q4 at €692 million, up more than 15% compared to Q3 2003."

Sector breakdown: Life sciences on the upper hand

As has been apparent in recent years, life sciences companies (biotechnology & healthcare) are increasingly in favor among investors. With €929 million, 38% of all venture capital flowing into European technology companies in 2003 targeted private life sciences companies. In 2002, the life sciences contribution to overall VC spending was 26%. Life sciences deals were the largest average size of any sector, averaging around €5.8 million.

As in 2002, software companies ranked second in 2003, netting a total of €548 million. The proportion for 2003 remained reasonably steady at 22.4%, compared with 24.5% the previous year. Interestingly, more software deals (181) were reported than in life sciences (154). A noteworthy slide was apparent for investments in European telecommunication players. Only 5.5% (€135 million) of all venture capital recorded among technology companies was raised by this industry, while in 2002 this sector accounted for 12.5%.

Country breakdown: Top 5 remain stable

Traditionally, technology companies in the United Kingdom attract the most venture capital in Europe. In 2003, the United Kingdom is indeed in a league of its own, reporting €843 million in venture capital raised, accounting for 34.5% of all technology deals in Europe. This proportion is only 1% down compared to the year before. The top 5 totals in Europe have also remained intact, which can be said of the respective percentages of the total as well. The UK is followed by Germany (unchanged at 16.7% in 2003), France (up slightly to 12.1% from 10.5% in 2002), Sweden (unchanged at 6.8% in 2003) and Switzerland (unchanged at 5.8% in 2003).

Stage breakdown: Exodus from first rounds slowing

126 European technology companies received seed or first-round funding in 2003, totaling €407 million. This represents 16.6% of the total amount raised. Although investors still shy away from first-time investments, the decrease has slowed. While in 2000, 34.7% of all venture capital funding was poured into seed or first round deals, this dropped significantly in the following years to 24.7% in 2001, and 17.5% in 2002.

The origin of the companies receiving such seed or first-round investments differs from the overall figures. The top 5 is still led by UK (41.7%), with France (16%) and Germany (13.1%) swapping places and two new countries entering, namely Belgium (7.1%) and Denmark (6.8%). Sweden plummets to the 10th spot, with only 1.2%.

Most active investors: 3i Group leads the pack

The most active investors in European high-tech companies measured by number of deals shows a clear leader in 3i Group. Tornado Insider Research reports 97 technology deals for the largest VC in Europe, which participated in deals amounting to €311 million. Funds from Danish Vaekstfonden have made 15 deals (in deals worth €50 million), Atlas Venture has performed well with 14 deals (€196 million), followed closely by Apax Partners representing 13 deals (total deal size €172 million) and funds from Crédit Lyonnais Private Equity with 12 (€124 million). Investors still investing in seed and first round deals include Auriga Partners, Deutsche Venture Capital, Benchmark Capital, Amadeus Capital Partners, 3i Group, TechFund Capital, ACE Management, tbg and Nordic Biotech, all reporting 3 deals each.

###

About Tornado Insider

Founded in 1999, Tornado Insider is the only true pan-European technology media company serving the technology industry, providing entrepreneurs, investors, service providers and other participants with a single-source view of high-tech Europe featuring primary research, editorial coverage, startup awards and events. Core to all of Tornado Insiders activities is the most extensive database available -- focused on European private technology companies, their funding deals and key decision makers. Through its products and services Tornado Insider offers valuable insight into the technology trends in Europe, its investment climate, as well as qualified sales leads, competitive intelligence, and support for due diligence activities.

More information on venture capital deals in Europe can be requested for via the contact below, or on www.tornado-insider.com/research.

For additional information, please contact:

Tornado Insider:

Ruud Kaitjily

Tel:    +31 20 462 1942

Fax:    +31 20 462 1961

rkaitjily@tornado-insider.com

www.tornado-insider.com