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Q3 Venture Investments Rise in China, Decline in Europe

Euro Notes and Coins (U.S. Mint)

(U.S. Mint)

Venture capital (VC) investments, according to Dow Jones VentureSource, moved in opposite directions in China and Europe during the third quarter of 2011. Dow Jones VentureSource is a database of investments from 67,000 venture-backed companies in North America, Europe, Israel, China, and India.

In the third quarter, investors put $1.3 billion into 89 deals for venture-backed companies in China, an 84 percent increase in investment and 19 percent increase in deal flow over the same period last year. However, VCs put €951 million ($US 1.3 billion) into 219 deals for European companies in the third quarter of 2011, a 12% drop in investment volume and 13% decline in deal numbers over the same period last year. This number of deals marks the lowest quarterly deal count for Europe since VentureSource began tracking the region in 2000.

Consumer services and information technology (IT) companies attracted the most interest among Chinese companies. Since 2005, consumer services have been the most popular investment area for VCs in China, continuing in the third quarter of 2011. Some 40 deals for consumer services companies raised $674 million in the third quarter, an increase from the same period last year when 22 deals raised $287 million.

Chinese IT companies, particularly those in software development,  raised $130 million in 15 deals, almost double the number of deals and more than triple the capital raised during the same period last year, says VentureSource. Ten financing deals in the business and financial services industry, however, raised $120 million in the third quarter, a 47 percent drop in number of deals and 36 percent drop in capital invested.

A few European industries bucked the general downward trend in the third quarter of 2011.  Investment in the medical devices sector more than doubled to €93 million ($US 126 million) as the number of deals rose 71 percent in 24 deals. Biotech and pharmaceutical companies in Europe took the largest share of the health care investments in the third quarter, with €163 million ($US 220 million) in 29 deals, a 44 percent decrease in investment and 9 percent decline in number of deals.

The European IT industry, recorded its lowest quarterly deal count with 63 deals drawing €183 million ($US 248 million), a 13 percent drop in number of deals and 31 percent decline in capital invested. As in China, software companies attracted the most interest.

VentureSource reported last week that VC investments in the U.S. rose in the third quarter of 2011 compared to 2010, including the number and size of deals and investment volume. Among science-based companies, medical device and energy companies gained in investment deals and volume. Among biotech and pharmaceutical companies, the number of deals increased, but total investment dollars dropped compared to the third quarter of 2010.

Read more: U.S. Venture Investments Up in Q3, Science Companies Mixed

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