Compared with second quarter 2004 totals, venture capital funding for European semiconductor companies was up more than 300 percent for the quarter, reaching 81.7 million euro (about $101 million), according to the European Venture Capital Report. The total number of venture capital deals for European semiconductor companies increased by one over the same period of 2004, according to the report.

The largest European IT venture capital deal during the second quarter was for semiconductor company Level 5 Networks of Cambridge, England, which received 24.7 million euro (about $30 million), according to the report.

Overall, the report concluded that venture capital investment into European companies slowed during the quarter, with 735.6 million euro (about $908 million) invested in 203 financing rounds, down 20 percent from the amount invested in the first quarter of 2005 and 34 percent from the amount invested during the second quarter of 2004.

As occurred in the U.S., investors in Europe were directing a greater percentage of their capital investment into later-stage financings, the report found. There were 371.6 million euro (about $459 million) directed toward later rounds in Europe, 50 percent of the total capital invested in the second quarter, compared to 43 percent of the total investment in the same quarter of 2004, according to the report.

Investors also continued to invest more sizeable sums into fewer financings, as median deal sizes have increased, according to the report — a trend that was also apparent last quarter.

The overall median deal size was 2 million euro (about 2.5 million) in the second quarter, up from 1.6 million euro (nearly $2 million) last year, according to the report, with the median deal size for second rounds climbing to 2.8 million euro (about $3.5 million), the highest level for that round class since 2000.

"The considerable percentage of capital being invested into later-stage companies, and the larger sums directed toward second round deals in Europe is a clear signal that portfolio consolidation is diminishing," said Gil Forer, global director of Ernst & Young's Venture Capital Advisory Group, in a statement. "European investors are demonstrating confidence in the prospects of the high quality entrepreneurial companies that remain in their portfolio. The increased attention for later stage investing may also be related to the liquidity environment in Europe, particularly for initial public offerings."