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International venture capital investment recovers after second quarter slump

International venture capital investment has bounced back after a second quarter slump but remains significantly below 2008 levels, according to a report by Dow Jones VentureSource.

Venture capitalists invested $1.8bn in 297 deals across Europe, Canada, Israel, China and India in the third quarter of 2009, up from $1.5bn in the second quarter, and $100m down from the first quarter of the year.

Europe was the main non-US recipient for venture investment, garnering $998m, up 23 per cent from Dow Jones' record lows of the previous quarter. The total is still a 48 per cent drop on the $1.9bn invested during the same period last year.

Deal sizes have also shrunk compared with 2008 levels in all regions. In Europe, the median size of venture capital deals dropped 30 per cent from $3.7m in the third quarter of 2008 to $2.6m. Israel presented a more promising picture, with deal averages that have steadily increased over the course of the year, despite a $5.2m median deal size representing a 31 per cent drop on 2008 levels.

Venture capitalists invested $5.1bn in 616 deals in the US, a slight drop from second quarter investment levels, and 38 per cent down from the same quarter 2008.

The second most popular venture investment destination after the US was the UK, which received $393m in 67 deals, nearly on par with the $419m in 83 deals during the same quarter in 2008. Mainland China had the strongest international performance, receiving $465m in 40 deals, a 41 per cent drop from the same period last year.

The recovery signs did not appear everywhere, with France in particular struggling through its worst quarter of 2009, with $173m investment representing a 58 per cent drop from third quarter 2008.

The top performing sector was IT, attracting $425m, due in part to a strong performance by the information services industry mitigating a record low performance for software investment. Healthcare also performed well, receiving $296m.

Despite some mixed performances, Dow Jones says that the overall growth is a promising sign. Jessica Canning, director of global research at Dow Jones VentureSource, said, “Even as individual regions see dramatic ups and downs quarter over quarter, overall international investments have been steady in 2009. This overall consistency is a promising sign as investors chart their course after the global downturn in 2008.”  
Source: Alt Assets

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