“We’re in what I like to call the ‘Valley of Doom’,” German entrepreneur and investor Lars Hinrichs told a conference last year – lots of funding at the early and late stages of company’s lifecycle and not enough in the middle.
It’s a common complaint in Europe and backed up by an analysis of the latest numbers from Dow Jones VentureSource, released today as a joint report by DFJ Esprit and Go4Ventures. While companies in some of Europe’s most important regions for startups raised $1.8bn in venture capital across nearly 270 deals in the first half of 2013, only 96 of those deals were worth more than $5m – and, surprisingly, France has attracted more follow-on deals this year so far than the UK.
Venture deals in Europe H1 2013 – all tech industry sectors, including life sciences
“What this data clearly shows us is that Europe is successfully launching fledgling businesses but there is a scarcity of available capital for the follow-on funding to get them to the next stage,” DFJ Esprit CEO Simon Cook said. “In Silicon Valley the ratio of large investment rounds compared with smaller ones is over 1:1 – in this latest data for Europe it is less than half that level.”
Overall deals down compared to last year
Compared to the same time last year, there’s a modest contraction in overall deal value in the regions covered. Looking just at deals worth over $5m, there’s a drop-off from 121 deals together worth $1.75bn in H1 2012 to 96 deals worth $1.497bn in H1 2013.
The UK is responsible for most of that drop – 46 deals worth over $5m in H1 2012 to just 25 in H2 2013. France jumped from 22 deals worth over $5m in H1 2012 to 28 in H1 2013, surpassing the UK for the first time since the study started. The figures for Germany, Austria and Switzerland together stayed constant at 18 deals over $5m in each period.
UK still landing bigger deals
Don’t predict the death of “Tech City” as a funding hotspot just yet. Already this year, the UK can claim a larger average follow-on deal size – $23m compared to France’s $11m. It also holds a larger share of the overall pie. Of that $1.8bn total invested in European venture deals so far this year, the UK can lay claim to $656 million followed by France at $399m and the German-speaking DACH region at $343m.
For Cook, it’s still a sign the UK needs to work to keep the top position in Europe. “From a geographic point of view, the UK is often seen as the US gateway into Europe and many of the leading VC funds in London have strong US links,” he said. “But UK’s historical position is under threat as governments across Europe use incentives to stimulate innovation and growth.”
Image credit: Flickr user stuartpilbrow
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