Dow Jones & Company: International Venture Capital Investment Rises In 3Q But Still Down Significantly From 2008

Following a slowdown in the second quarter, venture capital investments in the international markets rose back to levels seen in the first quarter of the year, according to new global data from industry tracker Dow Jones VentureSource. Venture capitalists put $1.8 billion to work in 297 deals in Europe, Canada, Israel, Chinaand Indiain the third quarter. This is up from $1.5 billion invested in the second quarter, but on par with the $1.9 billion invested in the first quarter.

"Even as individual regions see dramatic ups and downs quarter over quarter, overall international investments have been steady in 2009," said Jessica Canning, director of global research for Dow Jones VentureSource. "This overall consistency is a promising sign as investors chart their course after the global downturn in 2008."

In the U.S., venture investors put $5.1 billion into 616 deals, a slight drop from the second quarter and a 38% decrease from one year ago.

Investment in Europe* Recovers After Record Low In 2Q

According to Dow Jones VentureSource, Europegarnered $998 million (*730 million) in 201 deals during the third quarter of 2009, up 23% from the previous quarter which was the lowest on record since Dow Jones VentureSource began reporting on the region in 2000. The third quarter's total is still a 48% drop from the $1.9 billion invested in 312 deals during the same period last year.

"In Europe, the lag in the liquidity and fundraising markets has investors spending less, but spending wisely," said Arno Castanet, a research manager in Dow Jones VentureSource's Londonoffice. "In Information Technology, investors are putting more capital to work in the Web-heavy Information Services sector and in Healthcare they're favoring medical devices."

The Information Technology (IT) industry attracted the largest proportion of investment with $425 million (*311 million) invested in 87 deals in the third quarter, down 30% from the same period last year. Investment in the Web-heavy Information Services sector carried the IT industry as investors put $173 million (*127 million) to work in 22 deals. Meanwhile, the Software sector hit a record low with just $72 million (*52 million) invested in 35 deals this quarter.

Investors put $296 million (*216 million) into 41 Healthcare deals in Europeduring the most recent quarter, a 41% decline from the same period last year. For the first time, the Medical Devices sector attracted more capital than Biopharmaceuticals as investors put $158 million (*116 million) into 21 medical device deals and $122 million (*89 million) into 18 biopharmaceuticals deals.

Europe's Energy and Utilities industry was up 114% from the previous quarter, with $144 million (*106 million) invested in 22 deals. The industry, however, is still down 54% from a year ago. In the third quarter, all investments in Energy and Utilities went to companies in the Renewable Energy sector.

Deals Sizes Shrink Worldwide

According to the data, the size of venture deals has decreased around the world since 2008. In Europe, the median size of a venture capital deal dropped 30% from $3.7 million (*2.5 million) in the third quarter of 2008 to $2.6 million (*1.9 million) in the most recent quarter. While the median in Israelis now $5.2 million, a 31% decrease from 2008, it has steadily risen every quarter since the first quarter of 2009, a promising trend for investors and their companies.

The median sizes of deals in Indiaand Canadastood at $3.6 million and $4.2 million, respectively, year-to-date. In China, the median deal size was $7.4 million after the first nine months of 2009.

The median deal size in the U.S.dropped from $7 million a year ago to $5 million in the most recent quarter.

Further Country Perspectives

The second-favorite destination for venture capital, behind the U.S., the United Kingdomsaw $393 million (*288 million) put into 67 deals during the third quarter. This is on par with the $419 million (*284 million) put into 83 deals during the same period last year.

Despite a 41% drop from the same period last year, Mainland Chinahad its strongest quarter of 2009 as $465 million went into 40 venture deals during the third quarter. Notably, the country's business and financial services sector captured the most dollars with $155 million put into eight deals.

Francehad its worst quarter of 2009 and dropped 58% from the same period last year as venture investors put $173 million (*126 million) into 55 deals.

Israel-based companies garnered $191 million in 29 venture deals, 57% less than the $449 million invested in 48 deals during the same period in 2008.

In Switzerland, investors put $80 million (*59 million) into seven deals, on par with the previous quarter but down 37% from a year ago.

In India, venture capitalists invested $81 million in 14 deals in the third quarter, a staggering 70% less than the $274 million invested in 31 deals last year.

Capital investment in Germanyplummeted to $74 million (*54 million), down from $282 million (*192 million) a year ago.

On par with the previous quarter, Canadagarnered $115 million in venture capital with 13 deals completed in the third quarter. This is still a 48% drop from the $221 million put into 25 deals in the third quarter of 2008.

Swedenhad its best quarter of 2009 though venture investment was down 22% from one year ago. Capital investment in the country was $75 million (*55 million) in the most recent quarter.

*All Europeinvestment figures based on weighted conversion rates of 1.47134 (2008) and 1.36685 (2009). All percentages were calculated using USD.

About Dow Jones VentureSource's Research Methodology

The investment figures included in this release were collected by surveying professional venture capital firms, through in-depth interviews with portfolio company CEOs and CFOs, and from a number of secondary sources. These statistics represent equity investments into early-stage, innovative companies only and do not include companies receiving funding solely from corporate, individual, and/or government investors, or from buyout or other non-VC investment firms. For more information on our methodology, visit http://www.fis.dowjones.com/VS/VentureSourceFAQ.html.

For general information about VentureSource, visit http://venturecapital.dowjones.com.

No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.

Copyright 2009, Dow Jones VentureSource

About Dow Jones

Dow Jones & Company is a subsidiary of News Corporation (NASDAQ: NWS, NWS.A; ASX: NWS, NWSLV; www.newscorp.com). Dow Jones is a leading provider of global business news and information services. Its Consumer Media Group publishes The Wall Street Journal, Barron's, MarketWatch and the Far Eastern Economic Review. Its Enterprise Media Group includes Dow Jones Newswires, Factiva, Dow Jones Client Solutions, Dow Jones Indexes and Dow Jones Financial Information Services. Its Local Media Group operates community-based information franchises. Dow Jones owns 50% of SmartMoney and 33% of Stoxx Ltd. and provides news content radio stations in the U.S.

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