Latest Calibre One Index numbers shows that while US venture investment has bounced back to the highest level we have seen for over six years. In fact, reported VC investment in the US was over 15% higher than the highest previous quarter recorded in the life of this index which started. Previous high was $4,088 million in Q3 2007 vs the $4,810 million reported in Q1 2010.
Europe looks very different. With just $632 million of reported deals, this is one of the worst four quarters in the index and you need to go back to 2004/2005 to see those sorts of levels of deals. You can download the data at the end of this post.
Here are the charts:
- Combined VC Investment US & Europe Q1 2010 & previous 6 years
Biggest quarter ever recorded in terms of combined US and European investment masks the dire state of the European venture market.
VC Investment US vs Europe Q1 2010 & previous 6 years
While US investment levels have exceeded those in previous years, Europe is trending in the opposite direction.
VC Investment Europe country by country Q1 2010 & previous 6 years
No country or region across Europe can claim to be immune.
VC Investment UK & France Q1 2010 & previous 6 years
France, having maintained relatively high levels of investment in the early part of the recession has experienced a squeeze on capital too.
Number of VC Deals US & Europe Q1 2010 and previous 6 years
As the number of deals done remains relatively stable in Europe, the average deal size is reduced.
So is this all doom and gloom? Well at first sight there is not much to celebrate in Europe. There have been pitifully few new funds closed this year so far – Sofinnova (E260 million), Aster (E70 million) and Atomico ($160 million) being the notable exceptions.
There are also some issues that skew the numbers – the strong dollar means that any dollar denominated index will make investments in other currencies look weak.
What this index does miss however, (it does not set out to measure it), is angel/early investment at a sub $1 million level. Anecdotal evidence suggests that there has been a huge amount of activity in the early stage investment arena in the first quarter. (In fact, I have seen more than one lawyer smiling). If this angel/early stage activity becomes more organised, and if early stage investors with entrepreneurial experience bring the value to startups that we think they can, then the future for venture investment in Europe, whilst far from out of the woods, has plenty of opportunity to bounce back.
You can download the Calibre One Index here.
I have put the historic numbers into a Calibre One Index Numbers. If you use the information, please be sure to credit appropriately and share your thoughts.
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Big drops =[ I would say a lot of the money not being spent here is moving to china / india / places of cheaper development. You can get a lot more development for your buck in some places
That may be true for some sectors but there is still a great deal less capital being allocated to venture capital, particularly in Europe. This Wall Street Journal blog gives a quick primer on some of the reasons why.
http://blogs.wsj.com/venturecapital/2010/04/16/where-venture-capitals-money-came-from-in-2009/
This still means that the emerging, smaller, operationally focused early stage investors and super angles will be some of the most important players in the new European venture ecosystem.
Interesting figures. Thank you.
Do you think this indicates a bifurcation in US / European VC approaches? Would a smaller “micro” investment system lead to advantages for European start-ups? (e.g. I guess earlier profitability, leaner companies etc).
I wonder if there are any figures on the sub-$1million angel/early investments in both Europe and US
Good question. I certainly think that the European market is becoming reliant on a new and as yet not yet fully formed early stage ecosystem.
On the numbers, having looked at this for several years I think I can safely say that there is no meaningful measure of angel/early investments available. There are a few reasons for this: in some cases angel groups lie about the amount of money they have raised and exaggerate it in order to attract more deal flow; in others they lie and artificially reduce it in order that they are not swamped with lots of poor quality plans; some angels show off about how much they have invested in a deal as they like to be seen as BSDs; others don’t want to attract undue attention; some companies want to operate under the radar until they are ready to launch, in some cases this can take years; many angels are (highly) private individuals who don’t want people to know their business; some invest money into a few businesses but would not consider themselves angels.
The only way you could really work out the level in any meaningful way would be to pull Company 882s and 883s for every organisation and then work out whether the investors where individuals or funds. This is by no means clear in many cases (many private individuals invest through trusts or companies that do not make it obvious). This information would be out of date by up to almost two years before it was available and it would cost so much to compile and collate that you might as well give every UK householder an elephant (and this would probably have the same net value to UK enterprise).
I worked in a company that tried a lot of the above. It was not economical and despite data availability from Companies House improving, I don’t think it will be much use even now.
Unless anyone knows different…?
I would give up on Europe right now and rely on the Asian markets. There is cash swilling around in some parts with too few local investment opportunities, this is where the growth is in most technology markets and if you can get a good investment bank or team behind you, then it does look the best place right now.
If you look at the list of deals that C1 have tracked down, and then strip out those that are follow-on investments, then the number of new deals being done looks dismal in Europe, and very sector-specific. A question for UK PLC to ponder is whether or not the engineers and entrepreneurs in those sectors that used to get investment and then create value/jobs/wealth/fun will still be around if the money ever returns to those sectors.