The level of funds invested in European venture capital has fallen by a third in the third quarter this year, as investors are scared away by a lack of exit opportunities and the fear of writedowns, according to research by Ernst & Young and VentureOne.

Early-stage funds attracted €781m ($779m) in the third quarter, bringing an end to the mild upturn in seed and first round companies in the second quarter. This brings the total amount invested in European start-up companies to €3.3bn so far this year, compared with €8.5bn for the first nine months of last year. The third quarter also saw dealflow drop by 26%, with investors instead opting for second and later stage rounds, according to Ernst & Young .