The median value of European startups fell 25 percent during the second quarter as venture capitalists focused investments on later-stage companies in hopes of prepping them for initial public offerings, according to a study Tuesday.

The median pre-money valuation fell to €3.8 million ($4.6 million) during the second quarter, down from €5.1 million ($6.2 million) in the same three months last year, according to a study by VentureOne. Pre-money valuation is the worth of a company just before it receives its next round of venture financing.

worth of a company just before it receives its next round of venture financing.

The valuations of later-stage startups increased 22.9 percent while valuations for early-stage companies declined, with startups at the first-round stage of financing losing a median 20.8 percent valuation. Startups at the second-round stage devalued 43.9 percent.

Healthcare companies took a 35.3 percent hit, with median valuations dropping to €5.3 million ($6.4 million) from €8.2 million ($10 million).

IT companies fared a little better, falling only 16.7 percent to €4 million ($4.9 million) from €4.8 million ($5.8 million).

Startups got less money from venture capitalists as valuations fell. VCs in Europe put €735.6 million ($907 million) into 203 startups between April and the end of June, down from €1.12 billion ($1.38 billion) in 318 companies during the same period a year ago (see Europe VC Funding Drops 34%).

IPO Fever

The decline in investment came as the number of IPOs in Europe doubled in the second quarter, making it the best IPO period for the region in four years. Fourteen companies raised €313.5 million ($377.7 million) from public markets, a banner quarter (see European IPOs Double in Q2).

The rebounding exit market has encouraged a change in the investment mix, favoring bigger financings later in a startup’s development. In Europe, 50 percent of the invested capital went to later-stage fundings, up from 43 percent in 2004.

“Investors saw renewed exit opportunities for more mature companies in the last 12 months, so they appear to be refocusing their attention on existing portfolio companies and valuing them higher,” said Steve Harmston, a researcher at VentureOne.

This follows a trend with roots back in the first quarter, when investment rose 19 percent, but the number of companies that received funding dropped 26 percent to 199 from 272 a year earlier (see European VC Investment Up).

European VC Investment Up

The only countries to post valuation gains were Sweden and France.

Sweden, home to companies such as Volvo, Ikea, Skype (see eBay acquires Skype, Can Skype Stay Solo?), and MySQL (see RH-100 Europe: The Ikea of Databases), had the best median startup valuation of any country in Europe.

eBay acquires Skype

The country’s startups gained 277 percent in value over what they were worth during the same period in 2004, jumping to €6.8 million ($8.3 million) from €1.8 million ($2.2 million) a year ago.

U.S. Posts Valuation Gains

Median valuations in the United States increased to $15.6 million during the quarter, up 15.5 percent from $13.5 million in the year-ago quarter (see Startup Valuations Rise in Q2).

Posting the biggest valuation gains were startups in the healthcare industry, where median valuations jumped to $18.1 million, up $14.2 million from the year-ago quarter. Information technology stayed relatively flat. Valuations edged up to $15.2 million from $15 million.

Information technology stayed relatively flat. Valuations edged up to $15.2 million from $15 million.