Tornado Insider Reports: 2004 Showed Solid Increase in European Tech Funding

Three-year dip reverses as high-tech investment in 2004 rises 34%. Early-stage funding continues to grow.

Amsterdam, The Netherlands (PRWEB) February 25, 2005 --- After three years of solid decline, 2004 posted positive growth in European venture capital investment. Tornado Insider Researchs Deals Database recorded total investment in 2004 of €3.6 billion into 787 high-tech companies. This level of financing represents a 34.1% increase compared to 2003, with the number of deals increasing by 8.6%. The first half of the year accounted for the bulk of the growth; Q1 2004 recorded the most activity with 233 deals, which was the highest since Q1 2002. The total amount of funding was highest in Q2 2004, where 213 companies secured €1.1 billion - the only quarter in the past 2 years with over a billion euros of investment. The venture capital market cooled slightly in the second half of 2004, with Q3 dropping 22.3% quarter-on-quarter, followed by a 3.2% decline in Q4. Technology companies in Europe raised €813 million in Q4 2004. The number of deals did increase slightly (4%) in Q4 2004 to 174. After 3 consecutive years of decline, the average deal size increased in 2004 to €4.6 million, up 24% compared to the previous year.

Sector breakdown: Energy investment up, biotech funding spree stabilizes

All technology industries, except Materials & Nanotechnology and IT Services, pulled in more venture capital in 2004 than the previous year. In addition, all industries, apart from Software and IT Services, showed a higher deal flow. Energy & Agriculture reached an all-time high in 2004, with its €172 million raised by 23 companies representing a 180% increase on 2003. Biotechnology & Healthcare companies again managed to attract the largest slice of venture capital with €1.3 billion raised, 29% up compared to the previous year. This represents 37% of total European high-tech investment, a notch lower than the 38% in 2003. Biotechnology & Healthcares 215 deals showed a 17% increase in deal activity. Software funding came second place with €683 million raised, slightly higher (4.6%) than the previous year, with its relative share of financing decreasing from 24% to 19%. Software companies secured 7% less deals, although the 216 investments still places the industry first for deal flow. Both Communications (third with €539 million raised in 123 deals) and Computers & Electronics (fourth with €461 million raised in 113 deals) revealed a substantial increase in funding and deals.

In Tornado Insiders 2003 VC investment report, we anticipated a steady increase in European technology venture capital raised in 2004, and predicted a stabilization of biotech funding as well as a boost in energy-related deals," said Niels Valkering, Head of Research at Tornado Insider. However, the swiftness of the recovery in technology investment was a surprise, as well as the related surge in exits. The spectacular number of trade sales and increasing valuations mean that investors are regaining confidence to invest as exit routes become clearer."

Country breakdown: France boasts funding boost

Most European countries experienced a substantial increase in technology funding. Among the major markets, only Denmark, Netherlands, Belgium and Finland reported less venture capital raised. UK again pulled in most funding (€1.2 billion) with the highest number of deals (271) in 2004. Although this level of funding represented an increase of 28% compared to 2003, the relative contribution to total tech funding in Europe dropped slightly from its more traditional levels of 34.6% in 2003 to 33.0% in 2004. German companies attracted 25% more funding, with 109 companies securing a total of €553 million. Still it saw its relative amount compared to the European total drop below the 16% mark to 15.2%. The star of the top 3 countries was France, closing in on Germanys second place with €521 million (an increase of 60% compared to 2003), representing 14.4% of total tech funding in Europe. Normally France hovers around 12%. Switzerland jumped up two ranks to fourth position having reported €259 million, an increase of 71% and representing 7.2% of total funding in Europe. Swiss companies are relatively cash intensive businesses; this is reflected in the fact that the 29 deals place the country eighth in Europe for deal flow. Sweden regained fifth place (€188 million raised in 52 deals), outranking Ireland (€176 million in 45 deals), Denmark (€153 million in 45 deals), Austria (€115 million in 23 deals) and Spain (€109 million in 31 deals). Venture capital per capita tells an interesting story with Ireland topping the rankings at €43.7 per capita. Switzerland comes in second with €34.8, while 2003 leader Denmark dropped to fourth position with €28.2 per capita.

Stage breakdown: Investor appetite for new starts continues to grow

Early-stage funding in 2004 continued its H2 2003 increase as 22% of total high-tech funding went into seed/first-round financing. The €799 million total corresponds to a 57% increase on 2003. Early-stage deal flow increased from 166 in 2003 (22.9% of total financing) to 195 in 2004 (24.8%). Computers & Electronics and Energy & Agriculture companies reported substantial levels of early-stage funding with 34% and 41% of investment going into seed and first-round deals. Biotechnology & Healthcare also pulled in more early-stage funding in 2004, with 23.8% of the total, compared to 15.7% in 2003. Early-stage Communications companies netted a mere 9.3% of total funding in that sector.

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

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rkaitjily@tornado-insider.com

www.tornado-insider.com

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