TechSpin: VC Activity in Europe Bounce Back

European investors have opened the money spigot again.  Companies in the key mediatech sector raised €321.2 million during the first quarter of 2008, more than double the €154 million invested during the last quarter of 2007, according to Library House, which tracks venture investment in Europe and Israel.

The research firm defines the mediatech category as the intersection of media and technology, including content providers, social networks, gaming, music and search companies, advertisers and service platforms. The number of deals in the sector was up almost 50 percent between the two quarters, from 59 to 88.

Total investment in technology startups in Europe dropped 6.6 percent to €5.27 billion in 2007 from 2006, according to Library House, which is based in Cambridge, England. Total investment in all categories for the first quarter has not yet been announced.

The biggest rounds of €31.6 million each went to Scottish game developer Realtime Worlds and financial services comparison site MoneyExpert of Newton-le-Willows, England.

In the community and sharing category, largely social networking, Library House reported that 12 companies received investments including Wengo, a French site that dispenses advice for a fee; Mobango, a mobile social network; and Momail, a mobile mail and messaging application.

A boost in overall investment in Europe would be good news for beleaguered European entrepreneurs, who don’t hesitate to complain that it is tougher to start a company in Europe than in the U.S. and infinitely harder to raise money there. U.S. venture firms are active investors in Europe, but often want their companies to move to Silicon Valley, where they can benefit from a rich network of connections – and proximity to the world’s biggest market for information technology.

At Red Herring conferences, European venture capitalists have often expressed their concern about the “brain drain” of some of the brightest startups to the U.S. They also concede that European startup entrepreneurs don’t get the adulation they get in California or in Israel, which generates a remarkable number of startups in a country of 7 million people. And they admit that failure in Europe is still a stigma rather than the badge of experience that U.S. VCs often assign to repeat entrepreneurs.

The battle for funds is a real one in Europe, but so is the struggle to change a culture averse to risk. We can only hope that the boost in mediatech reflects the overall sector.