MF Global's Bankrupty Another Reason for VCs to Avoid Europe

Investors are already scared of Europe, and now they're likely to be more fearful.

Image: ACBJ archive

Everyone's scared of Europe.

In the third quarter of this year, the number of venture capital deals sunk by 13 percent, to 219, compared with the same period in 2010—the lowest quarterly deal count since Dow Jones VentureSource started tracking 11 years ago, according to information from the news company released today. The dollar volume also dropped 12 percent, to $1.3 billion, although the median size of a venture deal throughout Europe, $2.7 million, remained on par with last year.

And these numbers are tracking the last quarter. The very public bankruptcy filing today of broker dealer MF Global Holdings Ltd.—widely seen as the first real U.S. casualty of the euro-zone debt crisis—could well have an impact in the fourth quarter.

MF Global, founded by former Goldman Sachs co-chairman Jon Corzine, owned $6.3 billion of Italian, Spanish, Belgian, Portuguese, and Irish debt, according to Bloomberg Businessweek. The firm began to lose money—$191.6 million in the recent quarter. Finally, fears about its financial position activated a chain of events that eventually led to its Chapter 11 bankruptcy filing.

That filing is likely to chill investors across the world. According to VentureSource's latest report, there is "no clear indication of an improving global economic environment."

Which is why all those companies in Europe hoping to attract venture capital might be waiting a while.

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