Growth levels in technology VC investments across Europe are catching up with those in the US. In 2000 European technology investments reached a record o11.5 billion, posting an increase of 68 per cent on the previous year, according to PricewaterhouseCoopers Money for Growth 2000 Report. However, it is predicted that firms will struggle to match these levels in 2001.
Technology continues to be the largest industry grouping for investment, attracting 31 per cent of the total amount invested across all sectors in Europe. Over 6,500 investments were made in technology companies, with average deal size increasing slightly to o1.5 million.
Funds dedicated to technology investments are also on the up with e15.2 billion (32 per cent of total European funds raised in 2000) expected to be invested in early-stage and expansion stage technology companies. This is almost double the e8.4 billion, allocated to the sector in 1999.
The UK continues to lead the rest of Europe in terms of individual country investment, up at e3 billion from e2.2 billion. This accounts for 26 per cent of the total amount invested in technology across Europe. France has overtaken Germany in second place, accounting for 21 per cent of the total, up from 15 per cent in 1999. Germany’s share, at 20 per cent, has remained constant over the past two years.
Keith Arundal, PricewaterhouseCoopers director of the Money for Growth report, says growth levels in technology investments in Europe are hot on the heels of the US, reflecting the lead Europe has over the US in hot technology areas such as 2.5G and 3G wireless. However, average deal size for technology investments in Europe was still dwarfed by the US comparative figure of e18.5 million.
Arundal adds that technology investments have reached a peak and he doesn’t expect another record year in 2001. Looking at the US, the first quarter of 2001 witnessed a downturn of 40 per cent on the last quarter of 2000. He predicts Europe will also experience a decline, but that it won’t be as severe as in the US.
There are a number of factors driving growth in this sector. These include:
the evolution of entrepreneurial culture in Europe, and a less risk averse attitude; increasing globalisation of companies and financing of cross-border expansion; explosive and high profile growth in the e-commerce sector; and the growing opportunities afforded by new technologies, such as mobile Internet, optical technology and e-security.
However, in spite of the vast chunks of money available and no shortage of business plans, Arundal says VC professionals approaching investments with caution and early stage technology companies will find it harder to attract funding.
The global slowdown witnessed at the end of last year has seen VCs in both Europe and the US focusing on the their best performing portfolio companies and professionals are showing a preference for second and third round financing, rather than seed and early stage.
Around 1,400 venture capitalists across 21 countries were polled for the 2000 report.