‘3i abandons early-stage start-up investment’, read the front-page headline in the Financial Times’ Companies & Markets section on 25 March. In the article, the investment firm’s chief executive, Philip Yea, says 3i’s decision to pull out of early-stage venture capital was ‘a statement about us, not about the markets.’

3i’s situation is unique. The firm’s shift away from early-stage VC has been several years coming. Moreover 3i’s final decision to ditch early-stage investment in favour of later-stage private equity comes just as credit, on which the latter form of investment so heavily relies, is becoming more difficult to obtain. Observing prevailing financial industry conditions, other private equity investors may well choose the opposite strategy and balance their late-stage investments by moving into venture capital.

The story of 3i’s decision was first broken in January by TechCrunch UK, and confirmed a month later by Private Equity Hub. 3i incurred significant losses from VC investment during the dot-com bubble, however, and their decreasing interest in VC as a result may be clearly seen from previous years’ investment records.

Yet according to the FT, ‘the move underlines the woeful state of European venture capital’. The article emphasises the poor performance of European VC when compared with other types of private equity, such as buy-outs and mid-market deals, which are typically leveraged with debt.

These larger deals have grabbed both headlines and profits across Europe, but not at the expense of early-stage investment. Venture capital deals in Europe have continued at a steady rate over the past two years, with roughly 400 to 500 deals closing each quarter. Much of this activity occurs at the earliest funding stage: between 50% and 60% of venture capital deals in Europe each quarter are first-round deals. By contrast, third-round and later deals have accounted for less than 25% of VC deals in each of the past nine quarters.

Venture capital may become more attractive as an asset class in the wake of the sub-prime lending crisis, which has now sunk an investment bank and is generally troubling the financial waters. Cash - not debt - is king again, as the FT article states. Might private equity investors reassess early-stage, venture capital investment now that credit is tightening?

Perhaps; this past week saw an investment bank, a hedge fund and two private equity firms involve themselves in a major venture capital deal. On 20 March, London-based SpinVox raised $100 million (€64 million) from Goldman Sachs, Tosca Fund Asset Management, GLG Partners and Blue Mountain Capital Management. SpinVox’s technology lets mobile phone operators like Vodafone Spain charge subscribers to have their voice mails automatically transcribed and sent to them via text message.

The SpinVox deal alone is insufficient evidence of a renewed interest in venture capital amongst private equity investors, but it could presage further deals. The mammoth private equity returns seen in preceding years are unlikely to be seen again with the current credit environment. 3i appears to exiting the venture capital business just in time for others to enter.

MoneyExpert, the UK-based finance product comparison website, has received £25m (€31.6m) from Technology Crossover Ventures in return for a 40% stake. MoneyExpert’s service enables users to compare services from the top 30 finance brands in the UK based on price, key features and service measures. The company will use the funding to acquire the brand and technology platform of SimplySwitch, which was shut down last month due to low traffic to its site, in order to develop a competitive service to Moneysupermarket, the UK’s biggest price comparison site.

Realtime Worlds, the UK-based console game developer, has raised $50m (€31.6m) in third round funding led by Maverick Capital. Realtime Worlds is the developer behind Mobile Forces and Crackdown, and is in the process of developing All Points Bulletin, a massively multiplayer online game for Microsoft Windows and the Xbox 360, which will be published by Webzen.

Pieris, the Germany-based biopharmaceutical company, has raised €25m in series B funding from OrbiMed Advisors, Novo Nordisk (through the Novo Nordisk Biotech Fund), ABN AMRO Capital, BayTech Venture Capital Beratungs, Gilde Investment Management, Global Life Science Ventures, TransConnect, Forbion, and BioM. Pieris is developing Anticalins, a class of targeted human protein therapeutics that can be used in the treatment of human diseases, as well as enabling more effective detection and diagnosis. The company will use the funding to progress its product portfolio and prioritise its VEGF-modulating cancer product, PRS-050.

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BeInSync, the Israel-based developer of backup and sharing software, has been acquired by Nasdaq-listed Phoenix Technologies. BeInSync’s technology enables users to backup their documents and files across multiple computers, using peer-to-peer technology, allowing sharing and access to the data online. The acquisition will help Phoenix Technologies in its aim to improve the PC experience by embedding simplicity for end users.

RocTool, the France-based developer of composite material molding, has listed on the Euronext Paris Marché Libre with an IPO share price of €5.40 and listing 1,854,552 securities. Prior to this the company completed a private placement, with a capital increase of €3.2m, to be used to launch new technologies, invest into R&D and to enlarge its patent portfolio, accelerate its marketing and sales development, and install technology pilots in Europe, USA and Japan. In 2007 the company had a turnover of €1.03m and by 2012 expects to have increased this to €10m.

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Galil Medical, the Israel-based cryotherapy company, has appointed Martin J. Emerson as president and chief executive. Mr Emerson has over 20 years’ experience in the medical device industry and prior to joining Galil Medical was president and chief executive of AMS, where he had previously held executive positions including vice president and general manager of international, executive vice president of global sales and marketing and chief operating officer.

Chromatide, the UK-based purification services company, has appointed Clare Hildred as chief executive. Ms Hildred has over 17 years’ experience in business development and business management roles and prior to joining Chromatide was finance and business improvement director at Avecia Biotechnology.

Secerno, the UK-based developer of data security software, has announced the opening of a US headquarters and the appointment of three executives. Sam Paone was appointed as vice president of sales for North America, Thomas Nielsen as director of sales and Aaron Kramer was as director of customer technical sales. They have 17, 10 and 23 years' experience in their respective industries, and will be supporting the company's new US operations.

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Handy Group, the UK-based developer of transactional services accessible over the mobile phone, has informed Library House that it will be looking to raise between £500k and £1m (€635k and €1.3m) in funding in the fourth quarter of 2008 to be used for growing the company through the development of partnerships. Geoff Short (co-director) stated that the company would be looking to exit by the end of 2009, most likely through a trade sale, and would look to be profitable by the third quarter of 2009.

NexxtDrive, the UK-based developer of transmission systems capable of operating as part of a hybrid power system, has informed Library House that it will be seeking between £3m and £4m (€4.5 and €6.0) from institutional investors in May 2008. Don Forrest, finance director, also stated that the company would look to exit by IPO by the end of 2009, or in 2010.

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