Nicholas Watson in Prague -

Avast Software's decision to pull its Nasdaq IPO just days before it was due to be priced is a blow to those who had hoped the international offerings from AVG Technologies and EPAM Systems earlier this year signalled a new foreign investor interest in Emerging Europe's fast-growing technology companies.

As bne first reported on July 26, the anti-virus software provider Avast postponed its IPO due to what a spokeswoman described as the "overall bad market conditions." Avast had been expected to issue 9m shares, which if priced at the mid-point of the $9-11 per share range, would have raised $90m and valued the Dutch-based company - though like AVG it has its roots in the Czech Republic - at €846m.

Certainly, the recent rise in turmoil on European markets over rising worries about the economic situation in Greece and Spain sounded the death knell for the planned US IPOs by Avast as well as several others, such as Manchester United and Fender the guitar maker.

However, in truth the equity markets have been souring for some time on IPOs from tech companies out of Central and Eastern Europe. AVG, which listed on the New York Stock Exchange in February, has seen its shares fall 37.5% below their IPO price, while the shares of EPAM, which also listed on the NYSE the same month, are back to near where they listed at after having fallen about 65% from their post-IPO peak.

In May, the planned IPOs from Russian mobile phone operator Megafon and the country's largest social network Vkontakte were both postponed. Megafon blamed the delay of its listing from July to September on poor market conditions (though many wonder question if that's realistic), while Vkontakte - often called the "Russian Facebook" - said the debacle surrounding the US social media giant's own IPO damaged its prospects.

"The Facebook IPO destroyed the faith of many private investors so [Vkontakte's] IPO is postponed for an indefinite term," Vkontakte founder Pavel Durov wrote on his Twitter page.

J.R. Smith, CEO of AVG Technologies, says that the IPO situation for CEE tech companies is likely to get worse before it gets any better. "We are a European software company and we are pretty close to what is going on here, and start-ups and those companies looking for additional capital investment will find it tougher for sure over the next 12 to 18 months."

"By the time these tech companies are ready to be acquired or acquire, they will be able to take the next step for their growth, as hopefully some of today's turmoil will have past," Smith adds.

However, as Smith and others note, there will still be venture capital available for good companies with strong business models and revenues, as such investors are looking at a longer-term horizon for these investments.

According to Fast Lane Ventures, a Russian developer and incubator of internet companies, there were 59 deals in the Russian internet market in 2010, raising a total of $225 million; by 2011, the number of transactions had increased to 215, raising $540 million. However, even this is a probably an underestimate.

"The Russian internet market continues to be opaque," Andrey Kulikov, senior investment analyst at Fast Lane Ventures, said in a June research report on the financing of Russian internet companies and start-ups between 2010 and 2011. "We are aware of at least 100-150 seed investments completed by businesses and non-public holdings, and 20-30 major investments whose financial information is completely closed."

Taking into account these hidden deals, Fast Lane Ventures estimates the total investment volume in Russian internet companies and start-ups at approximately $500 million in 2010 and $1 billion in 2011.