The UK continues to head the rest of Europe in terms of venture capital deals and investment, even though the number of completed transactions fell in the second quarter.

In Q2, VCs completed 61 investment rounds into UK-based businesses, worth €299 million [£203.5 million]. While this was the greatest number in Europe, it was nevertheless down 15% and 20% respectively year on year, according to the Quarterly European Venture Capital Report from Ernst & Young and Dow Jones VentureOne.

The trend for greater investment in fewer deals was repeated in Germany, while France recorded an upturn in deals and investments in Q2. Overall in Europe, VC investment climbed to €1.14 billion, a 5% increase on the previous quarter, despite a 20% drop in deal flow.

IT companies attracted the bulk of the capital overall, raising more than €690 million in 138 deals. Biopharmaceutical companies also fared well, attracting €243 million in 27 deals.

VCs are still displaying a healthy appetite for early-stage investments, with 59% of fundings either seed, first or second rounds. Again, the number of investments was down year on year in Q2, but funding rounds were on average larger. “The European venture capital market saw an explosion in early-round investing as €600 million was poured into 126 early stage deals,” said Jessica Canning, director of global research for Dow Jones VentureOne. “The data shows the median amount invested in a first round during the quarter was €3.2 million, by far the highest total on record. Add to that a continued interest in later-stage deals and the overall median for a deal done in Europe jumped 41% during the second quarter to a record €3.1 million.”

John De Yonge, research director for the Ernst & Young Global Venture Capital Advisory Group, added that the record median round size in Europe this quarter is the continuation of a trend. “Over the last 18 months… investors [have provided] greater sums to fewer companies, allowing those companies to better compete globally and build critical mass for an IPO or M&A,” said. “During the same period, the proportion of deals and dollars directed to early-stage investments has increased, indicating that European investors are supporting a healthy pipeline of innovation in emerging sectors such as clean technology.”