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European venture in slow lane as B2C bubble grows in Silicon Valley

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European venture has hit its lowest level of activity in a decade, according to data from Dow Jones VentureSource

There were only 178 VC deals in the first quarter of the year, a drop from 268 deals in the previous quarter and significantly lower than the peak of 1,030 in the second quarter of 2000.

Although deal volume was low, the combined value of the deals (€1.04bn) was marginally higher than the previous quarter (€976m). 

Major deals include the £77m round in short-term loan company Wonga as well as the €72m investment in online music service Spotify by Kleiner Perkins. 

In stark contrast to persistently sluggish activity in Europe, the VC market in the US is roaring away, reporting the highest amount raised by venture funds in a quarter since 2001, just before the dotcom crash.  

In the early noughties, B2C services such as Webvan and Boo.com were the first to be rejected by venture investors. This time round, it’s consumer companies that are attracting venture funding in Silicon Valley, while startups offering business software and applications are reporting slower growth. 

In the first three months of the year, investments in consumer and social tech companies tripled to $874m, compared with $310m a year before. B2B tech companies, on the other hand, rose from $1.9bn in the first quarter of 2010 to $2.3bn a year later. 

The success of social tech companies such as Groupon and Zynga has led to less investor appetite in business applications. 

In addition, the growth of app platforms such as Facebook and Apple has made the route to market quicker and cheaper for consumer services. Business tech companies, on the other hand, have fewer opportunities to access direct and scalable platforms.

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