Intel: European start-ups starved of funding

Intel Capital, the investment arm of the chipmaker, has said that European venture funding has slowed down.

After a record year in 2005 for investment in European companies, with investment hitting €42.6bn (£30.4bn), funding fell away to €28bn last year and reached only €4.6bn in the first half of this year.

"We continue to be well in the shadows of the US in terms of the amount of dollars being committed to the venture industry," said Ashish Patel, managing director of Intel Capital UK on Thursday.

While start-ups now have the chance of securing a larger amount of investment individually, Patel said, the bad news is that fewer overall are given the chance to see if their ventures can make it. "The average start-up is funded better but the amount of dollars invested into the start-up environment continues to be the same. Therefore, the number of deals that are being invested in is going down."

While investment in Europe represents a fraction of that in the US, the UK forms a large part of European investments, said Patel. "The UK is still around 50 to 60 percent of the European market for venture capital funding," he explained. The amount of money available for investment funding may be smaller now than in recent years, but Patel said that investors were giving start-ups more time and money to see if their ideas would work.

"There are fewer deals but the average funding going into each deal is on the increase," said Patel. "Back in 2001, most of the start-ups were underfunded, so you had good ideas which were starved of cash. Before they could even take off, they ran out of cash and went bust."

With what venture funding it does have to offer, said Patel, Intel wants to back ecologically friendly "clean technology" throughout 2008.

"The frustrating thing is that Europe has a lot of [intellectual property] in this area that is not being funded," said Patel, adding that Intel is very rapidly trying to bridge that gap but will focus only on clean technology that has a strategic relevance to what it is doing as a company. Patel said "that is anything that aims to reduce carbon usage".

Patel claimed Intel is "very bullish" about helping the internet to go mobile. "[While] everybody wants to be connected to the web all the time, it isn't happening, and one reason is the telecom operators don't know how to function other than as telecom operators." Patel also said it was Intel's view that "3G is too expensive, and [the telecoms system was] created for only so much information and [it] will freeze up if [it] gets too much". He added: "We see WiMax to the front [and] that is why we are putting a lot of energy behind it."

Intel will also invest in health monitoring, using mobile sensors to check people's health. "You will see fundamental changes in the health-monitoring area because social costs are just sky rocketing," said Patel.

Digital media will also receive heavy Intel investment, said Patel. While there has been "a lot of hype around streaming and there will be a lot of hype around social networking", they are all part of the same issue, according to Patel.

Intel will also be spending more on financial investment in the "emerging markets" Patel said, but he declined to specify in exactly which countries.