Early stage loses appeal

Early stage allocations in Europe have fallen, accounting for under 15% of total private equity investments in European technology for the period July 1 to October 31, according Tornado Insider’s Data Service. This is down markedly from 25.4% for the same period in 2000.

Average deal size in Europe, particularly in later stage investments has also decreased, down by 20%. For the year to date, average deal size is €7.7 million, down from €9.2 million in 2000. However, early stage rounds are slightly larger this year at €4.1 million, up from €3.6 million. While later stage rounds have shrunk from €19.3 million to €10.5 million.

Ives Brant, director of research and editor-in-chief at Tornado Insider, said: “Seed and first rounds are slightly larger this year, but there are dramatically fewer of them. Venture capitalists are focused on later rounds, in part because they can reduce risk by betting on more established entities while – this year – obtaining valuations that can bring nearly the same payoffs as first rounds.”