European VC down, but getting more focused

European venture capital firms are backing the fewest companies on record, according to VentureBeat. They invested in just 897 companies last year, the lowest number since 1999. However, more money is going into fewer startups, reaching €4.56 billion, a two percent rise from 2006, and the fourth year of consecutive increase. Obviously this is all VC (so Cleantech etc etc), not just Web or mobile companies. The reason is put down to the lackluster market for mergers and IPOs in Europe and the difficulty of bringing a company to a stage where it returns profits and can then attract VC or be sold. The number of European venture-backed companies going public dropped to 38 from 89, while M&A deals fell 38 percent to 136, the lowest figure this decade. In addition hedge funds rarely invest in start-ups in Europe like they do in the US. However, US VCs and European VCs are piling into Eastern Europe where there are a lot of hard core tech firms being created. See my analysis of what’s going on there.

Meanwhile Carmel Ventures, an Israeli venture capital firm has established its third fund, Carmel Ventures III, with commitments of $235 million.This will focus on seed and early stage tech.