Tornado Insider Reports: European Tech Funding in Q2 2004 Hits the Billion Mark

The surge in venture capital targeting European technology companies continued in the second quarter of 2004, as the amount invested again showed a firm increase. Tornado Insider Researchs Deals Database reveals that a total amount of €1.04 billion was raised in Europe by 199 companies.

Amsterdam, The Netherlands (PRWEB) August 4, 2004 -- The surge in venture capital targeting European technology companies continued in the second quarter of 2004, as the amount invested again showed a firm increase. Tornado Insider Researchs Deals Database reveals that a total amount of €1.04 billion was raised in Europe by 199 companies. Compared to the previous quarter, 21% more funding was secured in Q2 2004, while slightly fewer deals were closed (down 3.4%). The main contributors to the funding surge were Biotechnology & Healthcare companies, while the Software category bounced back to rank second. At €5.3 million for Q2 2004, the average deal size was up for the fifth consecutive quarter, namely 25% compared to Q1 2004. 300 investors were actively investing in Europe in the quarter, a 9% drop compared to Q1 2004, but more than each of the 7 quarters preceding 2004.

The best performing month in the quarter was May. In this month, 75 companies pulled in €429 million, a figure unmatched since November 2002. April and June were almost on par with 61 investments totaling €299 million in April, and 63 investments amounting to €315 million in June.

Sector breakdown: Biotechnology & Healthcare funding hits three-year high

After cooling down earlier this year, Biotechnology & Healthcare investment soared in Q2 2004 to €482 million through in 56 deals. This amount represented 46.2% of total European funding for the quarter. In fact, the level of Biotechnology & Healthcare funding in Q2 2004 was the second highest ever recorded by Tornado Insider Research from 2000 to present. Only in Q2 2001 did the industry attract more funding, namely €545 million. The Software category regained second place in Q2 2004, by closing 44 investments totaling €177 million (representing 16.9% of total funding in Europe). Despite raising 5.4% less than the previous quarter, the €123 million (11.7% of total funding) netted by 36 companies placed Computers & Electronics third, up one rank. After a favorable Q1 2004 for Communications, the category plummeted 53% to a mere €89 million in Q2 2004 (8.5% of total funding), placing it fourth. The number of Communications deals dropped slightly from 39 to 30. All 5 remaining technology categories each revealed significant increases (over 30%). Notable is that Media & Entertainment jumped up three ranks in Q2 2004, coming fifth with €51 million raised. It needed a mere 5 investments to get there, which ranks the category eighth for number of deals secured.

We have seen a period of solid growth in Biotechnology & Healthcare investment in Europe in the past years, outpacing other sectors during the slide of the venture capital market." said Niels Valkering, Head of Research at Tornado Insider. In our 2003 VC Report, we had forecast for 2004 that Biotechnology & Healthcare investment would continue its growth. The proportion to overall European funding would remain stable at the 2003 figure of 39%, or decrease slightly as a result of the overall investment increase. However, the volatility surprised us: a sharp drop in Q1 2004 to 31% of total funding, followed by a spectacular recovery to 46.2% in Q2 2004. This level of investor interest in Biotechnology & Healthcare companies in Q2 2004 is exceptional, especially considering the cloudy IPO market conditions for this industry."

Country breakdown: Strong performance all round, except for France

UK and Germany lead the country rankings for technology investment, representing a respective 27.7% and 21.3% of the total amount invested in Europe. The UK normally averages around the 34%, but the €289 million (67 deals) raised in Q2 2004 still represented a slight increase of 3.7%. Technology investment in Germany soared to the highest amount since Q4 2001. A total of €223 million was invested in 34 companies. This amount represented an impressive increase of 75.5% compared to Q1 2004. 17% of all European deals were closed in Germany (compared to 38% in the UK), placing the number of investments up to 2002 levels. 26 French companies netted €100 million, a 38% decline compared to Q1 2004. As a result, France dropped a position to take third place with 9.6% of total funding, only just outranking Switzerland (€85 million) and Ireland (€70 million). Sweden (€61 million), Denmark (€59 million) and Spain (€57 million; up 308%) each showed a significant increase.

Stage breakdown: Early-stage funding up yet again

After the downturn came to a halt during H2 2003, investor appetite in early-stage companies has been increasing steadily. In Q2 2004, a total of €222 million was invested in 42 seed and first-round funding deals -- up 57% compared to Q1 2004. This figure represented the highest level of seed and first-round investment since Q3 2002. Notwithstanding the overall increase in venture capital funding, the relative amount going to seed and first rounds also keeps climbing. The amount reported in Q2 2004 equaled 21.2% percent of all venture capital funding in European technology companies (up from 16.2% in Q1 2004). With regard to the number of deals closed in the quarter, 21.1% concerned seed or first rounds (up from 20.2% in Q1 2004).

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:

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