VC investment outside US halved in 2009


Despite renewed vigour for non-US venture capital investment in the final quarter, 2009 witnessed a drop of 47 per cent from the previous year, with $8.2bn put to work in 1,391 deals outside the industry’s home ground. This compares to $15.5bn invested in 1,932 deals in 2008.

In the fourth quarter, venture capitalists invested $2.5bn in 396 deals in Europe, Canada, Israel, China and India – a 24 per cent drop from the $3.3bn invested in 472 deals during same period last year, according to new global data from Dow Jones VentureSource.

“The collapse of the global financial markets in 2008 took its toll on venture investment last year, causing annual investment in every market around the world to plummet,” said Jessica Canning, global research director for Dow Jones VentureSource. “The one positive sign going into 2010 is that the fourth quarter was strongest of the year for global investment.”

In the US, venture investors put $6.3bn to work in 743 deals in the most recent quarter, a slight up tick from the same period in 2008. Throughout 2009, venture capitalists invested $21.4bn into 2,489 deals for US companies, a 31 per cent drop from 2008.

According to Dow Jones VentureSource, 2009 was the worst year for venture investment into European companies since the firm began tracking the region in 2000. In 2009, venture capitalists invested $4.4bn (€3.2m) in 916 deals for European companies, down 41 per cent from the $7.4bn (€5.1bn) put into 1,234 deals in 2008. In the fourth quarter, venture investors put $1.3bn (€911m) into 252 deals, a 28 per cent drop from the $1.8bn (€1.2bn) put into 321 deals during the same period last year.

“In Europe, venture capitalists opened their wallets a little wider in the fourth quarter,” said Arno Castanet, research manager in Dow Jones VentureSource’s London office. “But with investors’ capital sources – fundraising and liquidity – still tight, entrepreneurs will continue to face intense competition for capital in 2010.”

The healthcare industry attracted the largest proportion of investment in 2009, collecting $1.5bn (€1.1bn) in 192 deals, down 29 per cent from the $2.1bn (€1.4bn) put into 284 deals in 2008. Biopharmaceuticals companies took the biggest slice of the industry’s capital, raising $1.1bn (€771m) in 103 deals, down 25 per cent from the previous year.

According to the data, the size of venture deals has decreased in all markets around the world since 2008. The median size of a venture capital deal in Europe dropped 24 per cent from $2.9m (€2m) in 2008 to $2.2m (€1.6m) in 2009. Mainland China had the highest median deal size of any region with $7m in 2009, a 13 per cent drop from the $8m median in 2008.

India saw the most dramatic drop as the country ended 2009 with a $4m median, down 44 per cent from 2008. Canada’s median dial size fell almost one third to $4.1m and Israel’s median dropped almost 20 per cent to $4.5m.

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