Xeon International looks back on a VC study performed by DOW Jones VentureSource
“Despite the recent downturn in the Venture Capital investment industry, we remain confident, looking at the results of the 4th quarter 2009 and first quarter 2010, that the market is showing signs of recovery” says Yves Duponselle CEO of Xeon International.” Looking at the latest figures we can clearly observe that, signs are looking good for the future. The situation will not improve instantly but the improvement process has already begun.”
Non-US Venture-Backed Companies Collected $8.2 Billion in 2009; Europe Sees Worst Year of Decade; Investments in China Drop 56%
In most markets outside the US, the fourth quarter of 2009 was the best quarter of the year for venture capital investment, but it did little to boost the year’s annual totals. In the fourth quarter, venture capitalists invested $2.5 billion in 396 deals in Europe, Canada, Israel, China and India, a 24% drop from the $3.3 billion invested in 472 deals during same period last year, according to new global data from Dow Jones VentureSource. Throughout 2009, investors put $8.2 billion to work in 1,391 deals outside the US, a 47% drop from the $15.5 billion invested in 1,932 deals in 2008.
In the US, venture investors put $6.3 billion to work in 743 deals in the most recent quarter, a slight up tick from the same period in 2008. Throughout 2009, venture capitalists invested $21.4 billion into 2,489 deals for U.S. companies, a 31% drop compared with 2008.
In 2009, venture capitalists invested $4.4 billion (€3.2 million) in 916 deals for European companies, down 41% from the $7.4 billion (€5.1 billion) put into 1,234 deals in 2008. According to Dow Jones VentureSource, 2009 was the worst year for venture investment into European companies since the firm began tracking the region in 2000. In the fourth quarter, venture investors put $1.3 billion (€911 million) into 252 deals, a 28% drop from the $1.8 billion (€1.2 billion) put into 321 deals during the same period last year.
“In Europe, venture capitalists opened their wallets a little wider in the fourth quarter,” said Arno Castanet, research manager in Dow Jones VentureSource’s London office. “But with investors’ capital sources – fundraising and liquidity – still tight, entrepreneurs will continue to face intense competition for capital in 2010.”
“Our clients have difficulties to understand that we are really in a severe competition for capital in the market and that they should revise their effort and commitment policies if they want to get funded, mentions Yves Duponselle, CEO at Xeon international, “resulting from an unbalanced market situation between offer and demand ”.
Deals Sizes Shrink Worldwide
According to the data, the size of venture deals has decreased in all markets around the world since 2008. The median size of a venture capital deal in Europe dropped 24% from 2.9 million (€2 million) in 2008 to $2.2 million (€1.6 million) in 2009.
Mainland China had the highest median deal size of any region with $7 million in 2009, a 13% drop from the $8 million median in 2008.
India saw the most dramatic drop as the country ended 2009 with a $4 million median, down 44% from 2008. Canada’s median dial size fell almost one-third to $4.1 million and Israel’s median dropped almost 20% to $4.5 million.
The median round size in the U.S. was $4.7 million, down from $6 million seen in 2008.
A reduced “Deal Size” affects significantly the Project financing costs as most of capital searches require more investors to finance one project says Giancarlo d’Elia, CFO at Xeon International.
*All Europe investment figures based on weighted conversion rates of 1.459079 (2008) and 1.3851 (2009). All percentages were calculated using USD.
Xeon International aims to create long-term business value for its clients and investors by offering a unique blend of result-oriented, risk sharing strategic value creation and implementation services. It operates within three functional areas: Project Financing – Fund Management & M&A – Growth Management.
Our teams consist mainly of experienced managers with deep theoretical and practical knowledge of their areas of specialisation which ensures rapid comprehension of relevant strategic and operational issues and a solid implementation of solutions. We devise innovative and result-oriented ways to create business value for our clients and investors.