@WSJ #VentureCapitalists Flock to China, Leave Europe Behind

By Isabella Steger

China has reached parity with Europe in venture capital financing for the first time ever.

According to data from Dow Jones VentureSource, in 2011 Chinese companies received $6 billion in venture capital equity financing, up 8% from the previous year, compared with $6.1 billion in Europe. That’s a sharp drop for European start-ups, who until 2009 were still receiving 86% more in venture capital financing than their Chinese counterparts, and 20% more in 2010.

In country rankings, that puts China in second place. In third place was the U.K., where VC financing for firms fell 32% year-to-year to $1.7 billion, though the U.S. remains, far, far ahead, where VC financing rose 10% year-to-year to $32.6 billion in 2011.

In terms of deal volume, the U.S. leads with 3,209 deals, China is in second place with 332 and the U.K. third with 274. This is the first time China has overtaken the U.K. since data for China were recorded in 2005.

Venture capitalists are also making some big bets in China. The median deal size in China, according to the data, is $12.4 million in 2011, compared with $5 million in the U.S.

Health care was the hottest sector for VC in China, as financing soared 73% in 2011 from the previous year to $317 million. I.T. companies also did well, receiving 35% more money in 2011 than the year before.

VC financing globally stood at $49 billion in 2011, flat from the year before, though it’s still some way off from the 2008 figure of $51 billion.

Correction: This post has been changed to reflect that China is in second place for the first time, ahead of the U.K., in terms of deal volume, not value.

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