Even taking into account any future late reporting of Q4 deals, 2007 investment levels are more than 5 percent down on those seen in 2006, dropping from Euros 5.64 billion in 2006 to Euros 5.27 billion last year, Library House maintains.

The only sector showing real growth is Cleantech, which continued its "remarkable" growth rate, breaking the Euros 200 million barriers for the first time, attracting a total of Euros 206 million of disclosed venture capital in Q4 2007 compared to Euros 196 million the previous quarter.

The number of deals also increased from 33 in Q3 to 37 in Q4. The European Cleantech sector as a whole attracted Euros 712 million in venture capital in 2007, almost double the Euros 317 million invested the previous year.

One of the biggest Cleantech deals in Q4 2007 was the Euros 18 million investment into CamSemi, the Cambridge-based fables semiconductor company developing power-saving integrated circuits.

Despite some major deals, the U.K. saw its share of the total amount of European venture capital invested drop to 22 percent in Q4 2007, the lowest share in two years.

Some of the countries that have increased their share of venture capital investment over the period, at the expense of the U.K., include the Netherlands, from 0.2 percent in Q1 2006 to 6.9 percent in Q4 2007, Switzerland, from 2.7 percent in Q1 2006 to 6.4 percent in Q4 2007, Germany, 9.3 percent in Q1 2006 to 11.4 percent in Q4 2007 and France, 13.6 percent in Q1 2006 to 15.2 percent in Q4 2007.

However, when looked at over an annual basis, the U.K. accounted for 27 percent of all venture capital invested in 2007 compared to 29 percent in 2006, a drop of only 2 percentage points.

Sofinnova Partners was the largest investor in terms of amount invested in Q4 2007, taking part in 4 deals for a total of Euros 91 million. The German-based High-Tech Grunderfonds was the most prolific investor, participating in 9 funding rounds during the quarter.

As regards exits, Q4 2007 saw the acquisition of 32 European venture backed companies, with fourteen others completing public offerings in Q4 2007 for a combined market capitalisation of over Euros 800 million.

Notable exits included U-blox, the Swiss developer of GPS systems, listing on the Swiss Stock Exchange with a market capitalisation of Euros 90 million.

For the whole of last year, 202 European venture backed companies were acquired. The second half of the year was weaker than the first, with 70 trade sales compared to 132 in the first half. The number of venture backed IPOs was also down between the first half and the second half of 2007 with just under a third of the year's total recorded during the last two quarters.

John Owen, CEO of Library House, commented : "The lack of European exits in the second half this year is concerning, especially considering recent data showing that 2007 was a record year for venture backed liquidity in the U.S."