Tech investment healthy in Europe, healthiest in UK

Private equity investments in European technology companies are climbing healthily, with the UK leading the way in stumping up funds. However, the good news is against a backdrop of investors still preferring the relative safety of buyouts as opposed to early stage ventures.

According to PricewaterhouseCoopers' figures, buyouts account for 40 per cent of overall technology investment.

Keith Arundale, European VC leader at PwC's Global Technology Industry Group, said: "Some investors will be thinking why they should invest in early-stage companies when they can make so much on buyouts."

Computer software continues to lead the way with €951m or 18 per cent of total technology investment, just ahead of communications carriers at €899m or 17 per cent.

The UK leads a field of six countries that account for around 90 per cent of European investment, raising significantly more funds than Sweden, the Netherlands, France, Italy and Germany, and investing - at €13.5bn in 2003 - significantly more than others, for example France's €4.3bn.

PwC pointed out that the numbers don't necessarily correlate directly with where investments are made but rather point to where money is coming from.

And while some pundits have predicted a biotech boom eventually to rival the late-1990s internet frenzy, this isn't seen in the latest figures.

Arundale said: "Long lead times with drugs means there is more demand for medical equipment, such as devices for diagnostics and therapeutics."

Another prediction is that only the top quartile of VCs will survive - players such as 3i and Apax Partners - along with some niche investors.

In all, €27bn of funds were raised in 2003, which - with the exception of 2000 and 2001 - is a steady increase on the years of the late 1990s.

Money for Growth 2004 - The European Technology Investment Report 2004 is available for free from PwC.