LONDON — European venture capital investment climbed to 1.18 billion euro (about $1.75 billion) in the third quarter of 2007, with half of this capital flowing exclusively to later-stage deals, according to Ernst & Young and Dow Jones VentureOne.

This was a 22 percent increase over amounts invested during the third quarter last year, despite there being 28 fewer deals. The 210 deals completed during the third quarter of 2007 was the lowest quarterly deal volume for Europe in at least six years.

"The growth in European venture capital investment this quarter comes from later stage investments and services-focused deals. While European seed and first round investment remained stable, later stage investment grew. Contributing factors include a lengthening time to move from a company’s initial VC financing to an M&A or IPO, requiring investors to fund operations for a longer period, and the need to provide European portfolio companies with the resources to compete globally. An increasingly supportive exit environment for venture-backed companies also encourages investors to provide additional resources to high potential later-stage companies," said John de Yonge, research director for the Ernst & Young Global Venture Capital Advisory Group, in a statement.

"The growing emphasis on services deals is part of a global trend in which investors are attracted by the relatively low capital requirements of services companies, their ability to acquire customers rapidly, and the strong exit valuations they are receiving, particularly in corporate acquisitions."

"For the second quarter in a row, the median deal size of a European venture capital investment reached a record 3 million euros," said Jessica Canning, Director of Global Research for Dow Jones VentureOne, in the same statement. "The data shows that while venture capitalists are participating in fewer deals than in previous years, they are putting more capital to work and especially in later-stage deals, which saw a 44 percent increase in euros invested during the third quarter compared to the same period last year."