Survey: European venture capital activity increases for fourth quarter

A European venture capital survey undertaken by Ernst & Young and VentureOne has found that, for the fourth quarter of 2003, European venture capital deal flow was increased by 7%, with a total of €855m invested in 249 financings in Q4 2003, compared to 233 financings and €871m raised in Q3 2003.

The number of venture capital deals in Ireland has remained largely constant in Q4 2003, compared to Q3 and Q2 of the same year, marking an end to the steady rate of decline since 2001.

The survey looked at VC investments in early stage, emerging and innovative companies, and also indicated that there was a 23% reduction in overall deals done in Ireland in 2003 compared with 2002.

Enda Kelly of Ernst & Young said: "2003 was a year when early stage investors retreated from new companies and concentrated on their existing portfolio of investments. This raised concerns about whether the next wave of new technology companies would get the support they needed.

"Given this, the substantial shift back towards seed and first round investing in Q4 is excellent news for entrepreneurs. It marks a turning point in the investment cycle, with venture investors regaining their appetite for taking more risk."

Key highlights from the survey include:

*Ireland saw 40 deals financed to date last year, compared with 52 deals in 2002

*A 27% decrease in the number of deals done in the information technology sector in 2003 compared to 2002.

*The biopharmaceuticals segment in Europe was particularly active, completing 46 deals this quarter and garnering €257m in investments - the highest amount invested in any single segment in the quarter.

*For the first time in over 12 months, the fourth quarter in Europe revealed a renewed interest in early stage investing, with seed and first round deals accounting for 33% of all deals in Q4 2003.

*On a European basis for the year in total, €3.5bn was invested in 1,039 deals, annual declines of 23% and 31% respectively, but the yearly rate of decline has lessened from the previous two years.