Report: International VC Investment Continues to Decline

LONDON/SHANGHAI: New global data reveals that venture capital investments in Europe, Canada, Israel, China and India fell to $1.46 billion in the second quarter, down from $1.99 billion in Q1 and 63-percent down from the $3.95 billion in the year-ago period.

There were 250 investment deals in emerging companies in Europe, Canada, Israel, China and India in Q2, according to Dow Jones VentureSource, as compared with 452 deals in the second quarter of last year. The figures for Q2 mark the lowest non-U.S. quarterly investment total since at least the height of the tech boom bust in 2003.

"We’re seeing a clear trend indicating more later round deals as venture investors work to sustain their current portfolio companies," said Jessica Canning, the director of global research for Dow Jones VentureSource. "As the IPO timeframe increases, investors are finding it more challenging to maintain their stakes in current investments."

In the U.S., venture investors put $5.27 billion into 595 deals. Europe garnered $831 million in 156 deals, reflecting a 47-percent decline from the $1.58 billion in 272 deals a year ago. This marks the lowest deal count and investment total for Europe since Dow Jones VentureSource began reporting on the region in 2000. In Europe, as in the U.S., the IT industry is seeing the most significant declines. The region also saw the median size of a venture capital deal drop by 13 percent from the $3.4 million in the second quarter of 2008 to $3 million in Q2 this year. In Israel, the median deal fell 32 percent in size to just under $4.1 million. The median sizes of deals in India and Canada stood at $4.2 million and $3.2 million, respectively, in the first half of the year. In the U.S., the median deal size dropped 18 percent to $5 million.

The report also notes that the U.K. was the second-favorite destination for venture capital after the U.S., with $292 million in 41 deals, a 12-percent drop. In China, $282 million went into 33 venture deals, an 80-percent decline, and in India there were 12 deals with $89 million invested, a decline of 66 percent. In France, however, VC investment gained 14 percent to $209 million in 57 deals.