Market Overview

Software Most Popular Sector For European Venture Investment In Third Quarter This Year


Dow Jones VentureSource: IT received largest investment allocation of the quarter; Consumer Information Services helps bolster Consumer Services; Biopharmaceuticals dominates Healthcare

LONDON, Oct. 29, 2012 /PRNewswire/ -- Venture-backed companies based in Europe raised just over €1 billion through 216 venture capital deals during the third quarter of 2012, an 11% decrease in capital raised and a 22% decline in deals from the same period last year, according to Dow Jones VentureSource. 

Information Technology received the largest investment allocation of any industry during the third quarter with a 31% share, showing the only gains of the quarter when compared with the same period last year. The industry accumulated €314 million, an increase of 50%, though deal flow was down 27%, with 59 deals completed during the period. The software sector remained the most popular investment area, raising €164 million through 42 deals during the third quarter, a 26% increase in investment albeit with a drop of 31% in deals completed.

"With European fundraising on track to surpass 2011 figures, we're anticipating that companies will continue to attract more financing", said Anne Malterre, European research manager, Dow Jones VentureSource. "At the moment, investors are being cautious due to the pressure of limited partners waiting for their returns, but we see the renewed trust in the information technology and consumer services industries, as well as early-stage companies, as a positive sign." 

During the third quarter, 31 European venture-backed companies were acquired, a 39% drop in deals from the same period last year, and two companies went public, compared to three in the third quarter of 2011.

Through the first nine months of this year, venture capital investment totaled €3.34 billion for 805 deals, a 6% decrease in capital and 10% fall in deals from the year-ago period.

Consumer Information Services Sector Helps Bolster Consumer Services Industry

Consumer Services, the leading industry for capital invested during the second quarter, dropped to second place this time around, raising €256 million through 58 deals, a decline of 18% in amount invested and 2% in the number of deals completed compared with the same period last year.  A total of 43% of the capital collected by the Consumer Services industry went to the Consumer Information Services sector, compared to the 33% share the sector garnered during the same period last year, but well below the 63% allocation the sector received during the last quarter.

Biopharmaceuticals Dominate Healthcare-Related Investment

Healthcare received 18% of all venture capital investment during the third quarter of 2012, dropping the industry down to third place. Compared with the same period last year, investment fell 32% to €179 million. So too did deal flow, by 55% to 31 deals completed. Despite attracting an 85% share of all healthcare-related investment for the quarter, the biopharmaceuticals sector still experienced a slight decrease of 4% in investment from the same period a year ago, raising €153 million through 21 deals. Investments in the medical devices and equipment sector slumped to €14 million in seven deals during the third quarter, a drop of 86% in amount invested and 76% in deal flow.

Energy & Utilities Drops on Both Counts

Energy and Utilities suffered sizeable drops in both investment and number of deals completed. Companies in the sector raised €40 million through 10 deals, a fall of 73% in capital invested and 23% in deal activity. Investment in renewable companies similarly declined: investment dropped by 27% to €29 million raised and deal flow also fell by 27% to eight deals completed.

Financial Institutions and Services Sector a Bright Spot Within Business & Financial

Business and Financial Services companies raised €150 million during the third quarter, a decrease of 7% compared with the same period a year ago. Conversely, the industry experienced an uptick of 12% in the number of deals, with a total of 37 completed. Investment in the business support services sector dropped by 37%, garnering €74 million through 20 deals. On a positive note, however, the financial institutions and services sector experienced significant gains, raising €45 million through seven deals, more than double the amount raised during last year's third quarter.

Early-Stage Deals Capture a Larger Slice of Deal Flow

Nearly 60% of deals in the third quarter went to early-stage companies, down from 64% in the same period last year.  Early-stage companies also accounted for 24% of capital invested, down from 47% in the same period last year. Second-round deals accounted for 22% of deal flow and 28% of capital invested, up from 18% and 19%, respectively, in the year-ago period. Later-stage deals accounted for 19% of deals, up from 17% a year earlier, and 48% of capital invested, a significant increase from the year-ago period when 28% of capital went to later-stage companies.

Country Perspectives

  • The U.K. retained its position as the favored destination for venture capital investment in Europe during the third quarter, despite experiencing drops in investment and deal flow compared with the same period a year ago. Companies in the U.K. raised €301 million through 59 deals, representing a 21% decrease in investment and a 34% decline in deals.
  • Germany consolidated its position in second place as companies raised a total €266 million, dwarfing the €105 million raised during the same period last year. Deal flow was also up, by 26%, to 43 completed. Germany managed to attract a 26% share of venture investment in Europe compared to just 9% during the third quarter of 2011.
  • France held on to third position, with companies raising €106 million for 32 deals, a 46% decline in investment and a 32% drop in deals from the same period last year.
  • The Netherlands secured fourth spot, raising €71 million through four deals, a 71% increase in investment despite a 33% drop in deal flow compared with the third quarter of 2011.

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