Europe will become the centre for technology investment within the next decade. That is the prediction of venture capital giant 3i.
American dominance of the technology industry has largely been attributed to the ease of raising capital in the US, both through venture capital and the Nasdaq technology stock market, versus the apathy from UK counterparts. But that is changing.
This week, the FTSE will introduce a new category for technology stocks, which according to 3i, is proof that the tide is turning.
Investment in technology startups now accounts for one third of 3i's ventures compared to a fifth five years ago. The majority of the companies receiving investment will be floated on the stock markets within the next decade.
"Technology investment in Europe is 25 per cent of investment in technology in the US. The minimum that will happen in the next few years is that we will catch up, if not overtake the US," said Jim Martin, director of IT investment, at 3i. "In five to 10 years the balance of technology investment will come from Europe."
IT flotations in Europe doubled last year from 41 in 1997 to 83 in 1998, which was more than in the US. It is no longer inevitable that these companies will float on both a European market and Nasdaq, the US hi-tech stock market. In 1997 80 per cent of those companies also floated on Nasdaq, in 1998 the figure fell to 50 per cent.
The bulk of these European flotations have not been in the UK, but in Germany and France. Martin put this down to the success of the secondary markets in those countries, the Neuer Markt and the Nouveau Marchi, of which there is no comparison in the UK.
This year there have only three IT floatations scheduled for the London Stock Exchange. Morse, computer reseller and system integrator, will float this week. Axon, a SAP consultancy and system integrator partner, and Synstar, formerly Granada computer services, both floated earlier this month.
Both IT companies and city analysts have welcomed the FTSE's move, as it officially puts IT companies on the institutional investors' map. But it is still too early to say whether this will mean that more technology companies will float in the London rather than alternative markets, like Nasdaq, or its struggling European relation Easdaq.
For more stories see 30 March issue of PC Week UK
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