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Tech bubble casts lengthy shadow

By on April 27 2005

Latest figures from law firm Ernst & Young’s annual Insight Study have revealed that the number of European firms backed by venture capital has continued to fall over the past 12 months.

According to the study, between 2003 and 2004 the number of European businesses with venture capital backing tumbled 21 per cent to 3,538. The cumulative value of these investments slid by a less severe ten per cent to billion and similar trends were noted in the US and Israel.

To Ernst & Young’s Stuart Wilson, however, this trend should not cause excessive concern as it suggests ‘the post-bubble clean-up is still underway’. In 2000 – at the height of the tech boom – venture capital funding reached record levels and it is the disposal of these investments that has been gradually driving figures down.

Wilson’s analysis is supported by the fact that the decline in venture-backed companies has been sharpest in the hi-tech-favoured IT sector. By way of contrast, cumulative investment in healthcare companies rose 27 per cent during the period.

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