Growth in Venture Investment Outpaces Deal Activity in Major Venture Hubs in 2010

NEW YORK, Feb. 7, 2011 /PRNewswire/ -- Venture capitalists from around the world invested $37.7 billion in 4,377 deals for companies based in the U.S., Europe, Canada, Israel, Mainland China and India in 2010, according to Dow Jones VentureSource. This represents a 14% jump in investment but only a 2% increase in deal activity from 2009, when $33 billion was raised for 4,299 deals.  

"In China and Israel, investment growth significantly outpaced deal activity as investors favored mature companies, which often require larger rounds," said Jessica Canning, global research director for Dow Jones VentureSource. "Several venture hubs – including China, India and Israel – also saw their highest median deal sizes on record, a sign of maturing venture industries, while growth was more modest in the U.S. and Europe, which have established venture environments."

Europe: Venture Investment Continued to Suffer in Fourth Quarter

Venture capitalists put $1.1 billion (euro 843 million) to work in 230 deals for European companies in the fourth quarter of 2010, a drop in both deal flow and investment activity from the fourth quarter of 2009, when investors put $1.5 billion (euro 1 billion) into 333 deals. The fourth quarter saw the lowest quarterly investment figure for Europe in 2010.

Throughout 2010, 1,039 venture deals raised $5.2 billion (euro 3.9 billion), a slight increase in investment from the $5.1 billion (euro 3.6 billion) collected for 1,118 deals in 2009.

"Although investment is up from the all-time lows of 2009, a robust recovery has failed to materialize and investors remain cautious about deal making," said Canning.

For a detailed venture financing report on Europe, visit http://www.dowjones.com/pressroom/releases/2010/02072011-EU10-0111.asp.

Asia: Investors in China Favor Mature Companies; India Sees Solid Growth

In 2010, venture investors put $4 billion into 262 deals for companies in Mainland China, a 59% increase in investment but a slight decrease in deal activity over 2009. The spike in investment is a result of larger rounds as the median deal size for China-based companies rose 47% and hit a record high of $8.8 million.

As China's IT industry saw a record-low deal count ― 50 deals collected $550 million ― the Services industries saw strong spikes. Business and Financial Services, which benefited from strong interest in advertising and marketing companies, raised $781 million through 45 deals, a 138% rise in investment and a 29% increase in deal flow. Driven by Web and retail companies, the Consumer Services industry garnered $1.8 billion for 86 deals, more than double the capital put into the industry in 2009 but only a 6% increase in deals.

Investors in China-based companies strongly favored mature companies, as 93% of the capital invested went to companies that are generating revenue.

In India, venture capitalists invested $895 million in 92 deals in 2010, a 15% increase in deal activity and 14% increase in capital invested. Forty-one percent of capital went to Consumer Services companies, which collected $369 million for 29 deals. Investment in the Business & Financial Services industry was also strong as 28 deals garnered $282 million. The $8 million median deal size was almost double the $4.2 million median seen in 2009 and the highest median on record for the country.

Israel: Larger Rounds Lead to Investment Growth

Investors put $655 million into 84 deals for Israel-based companies in 2010, a 23% jump in capital invested despite a 33% drop in deal activity. The median deal size jumped 67% from $3 million in 2009 to $5 million in 2010, a record high for the country.

North America: IT Drives Investment in Canada; VCs Step Out of Comfort Zones in U.S.

In Canada, 101 deals garnered $736 million in 2010, a 38% increase in deal activity and 44% spike in capital invested over 2009. The country's biggest draw continued to be the IT industry, where 45 deals collected $308 million, 45% more deals and 64% more capital than the year earlier. The median deal size dipped slightly from $4.2 million in 2009 to $4 million in 2010.

In the U.S., growth in venture capital investment was driven by capital commitments outside of the Information Technology (IT) and Healthcare industries, which are traditionally venture capitalists' comfort zones. Throughout the year, 2,799 venture deals raised $26.2 billion, a 6% increase in deals and an 11% increase in capital invested over 2009. For additional details, visit http://www.dowjones.com/pressroom/releases/2010/01242011-10USVC-0105.asp.

For information on VentureSource's research methodology, visit http://bit.ly/VSFAQs. For general information about VentureSource, visit http://www.dowjones.com/privatemarkets. Follow VentureSource on twitter at www.twitter.com/djventuresource.

*All investment figures are converted to USD using the exchange rate on the first day of the month in which the round closed.

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