The communications and software markets are the most appealing to European venture capitalists (VCs), while the internet sector is beginning to attract investors.
A survey by PricewaterhouseCoopers (PWC), Money for Growth, which is part of an overall study on private equity and VC investment and was conducted with the European Venture Capital Association (EVCA), showed that investments in the hi-tech sector rose last year by 75 per cent to Ecu4.0 billion (see story above).
The number of investments rose by 42 per cent to 2,998, while the number of companies financed was up 51 per cent to 2,402. The average deal size was up 23 per cent at Ecu1.3 million.
Investment in the communications sector, which includes telecoms service providers, equipment vendors, data networking companies and mobile phone firms, grew by 124 per cent in 1998 to Ecu1.238 million, representing the largest growth across all sectors.
The computer-related category, consisting of hardware, software, the internet and semiconductors, received the largest number of investments at 1,320. The software sector accounted for the greatest number of that funding at 1,102 investments or 37 per cent of total technology companies.
Ecu124 million was invested in the computer-related sector and Ecu89 million in internet companies, with software accounting for Ecu1.028 billion.
Marco Rochat, leader of the Global Technology Industry Group EMEA at PWC and partner in charge of the report, attributed the appeal of the communications and software sectors to a VC industry that is more knowledgeable about the IT sector, as well as more professional, business-like proposals from entrepreneurs. Rochat also cited an improving climate for second and third round investments.
Rochat acknowledged that there was an overlap the internet-related businesses, but added that in Europe, the internet and e-business companies were beginning to fuel growth.
'There is still Ecu17 billion left to invest and we are looking for companies to invest in. But while companies need to have their ideas, they also need a good business plan to bring the whole act together,' he pointed out.
Rochat predicted that the internet sector would grow quickly in the coming year as it matures and valuations stabilise, bringing increased investor confidence.
But he added that internet-based companies were far from stable, having valuations that rocket and plunge due to fluctuations in the various stock exchanges.
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