Dow Jones VentureSource 3Q’14 Europe Venture Capital Report

The following report presents Dow Jones VentureSource’s quarterly findings for European venture capital fundraising, investment, and liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market.

Highlights for 3Q 2014 include:

European venture capital fundraising declined from 2Q 2014 but managed to exceed 3Q 2013 levels;

Venture capital investment into European companies improved for the second consecutive quarter to reach highest quarterly investment figure since 3Q 2001;

As merger and acquisition (M&A) activity stayed flat, exits via initial public offerings (IPOs) fell short of 2Q 2014 levels but remained comfortably above those of 3Q 2013.

FUNDRAISING

European Venture Capital Fundraising Declines in 3Q 2014

A total of 15 European venture capital funds accumulated €600 million during 3Q 2014, a decrease of 42% in euros raised and 25% in the number of funds with closings from 2Q 2014.

Despite a decline in fundraising from 2Q 2014 levels, the number of funds with closings during 3Q 2014 increased by 50% compared with the same period last year while euros raised increased by 20%.

The largest fund of the quarter was Advent Venture Partners’ Life Sciences II LP fund, which raised €114.6 million, accounting for 19% of the total amount raised for 3Q 2014.

FINANCING

Investment into European Venture-backed Companies Improves in 3Q 2014

European companies raised €2.3 billion for 323 deals during 3Q 2014, an increase of 3% in the amount raised, despite a 17% fall in the number of deals completed from the previous quarter. 3Q 2014 saw the highest quarterly investment figure since 3Q 2001 when €2.7 billion were raised.

In contrast with 3Q 2013 figures, despite deal flow decreasing by 15%, investment improved by 36%.

So far in 2014, European venture-backed companies have attracted €6.1 billion across 1089 deals, a decline of 6% in deals completed from the first nine months of 2013, but a rise of 38% in euros invested.

Equity Financings into Europe-based, VC-backed Companies, by Industry Group (3Q 2014)

The Business and Financial Services sector received the largest allocation of investment during 3Q 2014 (40%), accumulating €927 million through 76 deals. Despite deal flow dropping by 36% from 2Q 2014, sector investment rose by 68%.

Consumer Services placed second in terms of equity financing, taking a 30% share of all 3Q 2014 investment. The sector raised €680 million across 98 deals, a decline of 12% in capital raised and 13% in deals completed from the previous quarter.

Healthcare remained third, with companies in the sector gathering 15% of the total amount invested during the quarter. The sector received €351 million across 48 deals, representing a 20% drop in deal flow and a 26% fall in capital invested from 2Q 2014.

Equity Financings into Europe-based, VC-backed Companies, by Country (3Q 2014)

Germany became the most favoured destination for equity financing during 3Q 2014, receiving €1.2 billion across 60 deals. The country took in 53% of all investment into European VC-backed companies for the quarter.

The United Kingdom placed second, capturing a 23% share of European investment. Deal flow declined by 9% from 2Q 2014 with 90 completed, while investment fell by 11% from the prior quarter to total €526 million.

Switzerland occupies third spot raising €136 million, a 6% share of investment. France placed in fourth position with a 5% share, raising €113 million during 3Q 2014.

LIQUIDITY

Europe Sees Overall Decrease in 3Q 2014 Venture Exit Activity

A total of 41 venture-backed M&As took place in Europe during 3Q 2014, down one from 2Q 2014 and level with 3Q 2013.

The largest M&A of 3Q 2014 was VK.Com Holdings Ltd., a Russian social network provider, which was acquired by Mail.ru Group Ltd. for €1.1 billion.

Sixteen venture-backed IPOs took place during 3Q 2014, five fewer than in 2Q 2014 but a significant increase on the three completed during 3Q 2013.. Companies raised €447 million for their listings during 3Q 2014, a decline of 15% from the €530 million raised in 2Q 2014. The figure, however, dwarfs the €26 million raised through public offerings during 3Q 2013.

The largest European VC-backed IPO of 3Q 2014 was ProQR Therapeutics BV’s September listing on the NASDAQ. The company raised a total of €72 million, equating to 16% of the total amount raised through European venture-backed company IPOs for the quarter.