During 2009 the VC investment market in the UK and Ireland suffered its most rapid decline since the bursting of the internet/telecoms bubble in 2000, according to the technology focused investment group Ascendant.
In 2009, £622m was invested compared to £1,001m in 2008, says Ascendant. The number of deals done in 2009 was 194 - 24% less than in 2008.
Q1 saw a near 65% drop in activity but there was a modest bounce back in Q2 and Q3. Q4 saw relatively few completions.
In 2009, £622m was invested in 194 deals of over £0.5m by 187 investors.
The busiest investors were Enterprise Ireland, Scottish Enterprise, Octopus Ventures, Accel and Atlas Ventures.
Private investors participation in VC deals rose to 22% up from 19% in 2008
The 10 biggest deals included: O3b Networks (£43m), Ocado (£30m), Imperative Energy (£27m), Intune Networks (£19m), Wonga (£19m), Intelligent Energy (£18m), Skyvision Holdings (£15m), Picochip (£12m), TMO Renewables (£11m) and Viagogo (£11m).
There were five primary areas of investment focus - Cleantech (£176m), Internet/Wireless Services (£150m), Comms Hardware (£86m), Software (£79m) and Semiconductors/Opto (£74m).
For the first time in Ascendant's data, Cleantech was the sector most favoured by investors. Investment in the subsector increased by 63% and giving it 28% of all funds invested.
The key deals included: Imperative Energy (£27m), Intelligent Energy (£18m), TMO Renewables (£11m) and Aquamarine Power (£10m).
Interest in the Internet/Wireless Services sector dropped by 46% in 2009 from a very high level in 2008. 49 Internet/Wireless Services companies received investment in 2009. Ocado (£30m), Wonga (£19m), Viagogo (£11m) and Seatwave (£10m), Glasses Direct (£10m) and Livebookings (£10m) received the biggest VC cheques.
O3b and Intune Networks took most of funds invested in the communication hardware sector. 6 other companies received more than £21m between them - including UbiquiSys, Nujira and Camb Broadband. Investment in this subsector increased by 93%.
Close to 50 software companies received investment in 2009. The largest deals were Imagini (£9.5m), Tribold (£7.2m) and Ecommera (£6.3m). Investment in the software sector declined by 65%.
21 semi/opto sector companies raised finance in 2009. The largest investments were Picochip (£12m), Virtensys (£10m), Light Blue Optics (£9m) and Powervation (£6m). Investment in the semiconductor sector declined by 47%.
All regions except Ireland experienced a significant decline in volume and value of investment. Cambridge was worst hit in terms of reduction in the number of deals done. The South West experienced the biggest percentage drop in funds invested. London remained the biggest single region taking 25% of value and 28% of volume - a big reduction from the 34% of value in 2008.
The most active investors throughout the year, and in particular during the very difficult period of Q1, were government assisted funds, according to Ascendant.
Ascendant's definition of 'government-assisted' ranges from regional development agencies through to VCT and EIS funds.
In 2009 these government-assisted sources of capital represented about 14% of active funds and wrote about 29% of the "investment cheques" (by number not value).
These figures are up from the equivalent numbers in 2008 - 12% and 23% respectively - but not excessively so given market conditions.
These government assisted funds were not the only group who played an increased role in the market last year - corporate/strategic investors, family funds and private investors, were also more visible.
Ascendant reckons it will be interesting to watch if the levels of interest from these latter two groups changes if/when the performance of other asset classes recover and/or tax reliefs are reduced.
Clearly, reckons Ascendant, these changes and the "stuttering"/"re-emerging" (choose your own forecast) economy will have a profound effect on the ease with which companies will be able to attract additional finance now or achieve an exit in 2010. Ascendant is currently advising a number of companies in the UK and in Europe on fund raising and M&A transactions.