EUROPE - European venture capital suffered a traumatic start to the year as first quarter investment fell by around 39%.
Research by Ernst & Young and VentureOne revealed that investors pumped e639m into VC markets during the first three months, down from e1.05bn in Q4 2002.
The UK market, which remains the largest and most active in Europe, went through a particularly poor quarter with a 48% decrease in investment from e365m in Q4 2002 to e191m in Q1 2003. The number of deals completed also declined to 49 from 71 during the same period.
Stuart Watson, who leads Ernst & Young's venture capital advisory group in the UK, said: These are very disappointing figures. Deal flow appeared to have stabilised in the second half of last year after a poor run, but it is evident in the last quarter that the VC market was not immune from the impact of world events that other markets also experienced.”
Other major European markets showed a similar downward trend. Investment in Germany was down from e209m in to e121m quarter on quarter. France showed a fall of 42% to e97m. The four largest markets, Germany, France, UK and the Nordic region accounted for 78% of VC investment in Europe in Q1,2003, down from 92% of market share in Q4 2002 as less developed markets proved more resilient to macroeconomic pressures.
Stuart added: However, we should not read too much into one quarter, especially a quarter with a number of special one off factors applying.
“Portfolio companies are addressing, good management teams to work with, and the ability to live with those companies until exit options become clearer, values are looking attractive and the next year or so should be a time in which to invest .
Sectorwise, the most dramatic fall was in the biopharmaceutical sector, down 54% from e321m in the last quarter to e147m in Q1 2003.
Watson said that although the reduction of interest from new investors is nerve wracking for start-ups, “entrepreneurs can now be assured that any early stage investor is likely to be committed for the full five to seven years before exit, and are encouraging their portfolio companies to take a considered and measured approach to building their businesses for long term success.
Collective defined contribution (CDC) savers should be allowed to access pension freedoms when the scheme is rolled out, last week's Pensions Buzz respondents said.
Partner Insight: A fiduciary management approach gives trustees a richness of information you can't get with a standard adviser approach, especially in times of market uncertainty, explain Russell Investments' David Rae and Paul Wharton
The PPI has unveiled a policy paper outlining current considerations and policy debates relevant to DC scheme default strategies. Kim Kaveh explores some of its views.
The £30bn local government pension pool has appointed Quoniam and Robeco to manage an active equity portfolio worth around £400m.