Although the technology sector remains in the doldrums PricewaterhouseCoopers (PwC) Money for Growth 2001 Report shows the industry is still popular with investors, attracting 31 per cent of the total amount invested across all sectors in Europe last year. In 2001 European technology companies received EURO7.4 billion of investment. Keith Arundale, venture capital sector leader for PwC’s Global Technology Industry Group, looks on the bright side: “While technology investments were down 35 per cent on 2000, this is nowhere near as much as in the States there is still an appetite for tech investments in Europe, which is encouraging.”
Within the technology sector computer software is still the most favoured area, receiving investments totalling EURO2.3 billion in 2001. Arundale cites security software as a hot tech area and says there is still a lot of interest in wireless, mobile, SMS, 3G and interactive TV. Although he is hopeful that technology investments will increase in 2002/2003 Arundale commented: “A return to sustained growth in technology venture capital investing is not likely to occur until large corporations increase their technology spending, and investment liquidity improves in terms of renewed growth.”
According to PwC other factors likely to fuel an eventual upturn in technology investments include the improved entrepreneurial culture that has emerged as a result of the dot.com/ Internet bubble, an improving tax environment in many European countries, specialist focus on technology sectors by VCs and more realistic valuations. However, Arundale also predicts: “We will see some consolidation in Europe going forward with a shake out of the VC houses set up in the boom time of 1999, but with little experience in tech investing.”
The report also found marked national differences in the proportion of money invested in technology relative to total investment across all industries. Ireland led with 81 per cent of investment going to the high tech sector. Arundale explains: “Ireland has always been a hot-bed of tech activity and because there are a number of large, well established tech companies there, you get the spin-outs.” Iceland follows with a 79 per cent share, Finland with 51 per cent, Italy with 46 per cent and Germany 38 per cent, in contrast with 27 per cent in the UK, 23 per cent in France and just seven per cent in the Netherlands.
The number of technology investments made last year was 5,200 and the average deal size was EURO1.3 million, compared to an average of EURO10.8 million in the US. Of the funds raised last year 25 per cent, or EURO9.6 billion, are destined for early or expansion stage investment in technology. This has dropped from EURO15.2 billion in 2000.
The UK leads Europe with 26 per cent of money invested in European technology companies. Germany regained second place from France in 2000 with 21 per cent, France attracted 13 per cent and Italy 12 per cent. Germany led by number of deals with 1,026 deals compared to 1,002 in the UK.