MoneyTree Report for Q3 2010: VC Investment Declines but First-Time Financings Remain Steady

Venture capitalists invested $4.8 billion in 780 deals in the third quarter of 2010, according to the recently published MoneyTree Report from PricewaterhouseCoopers (PWC) and the National Venture Capital Association (NVCA), based on data from Thomson Reuters. Quarterly investment activity decreased 31% in terms of dollars, and 19% in the number of deals, compared to the second quarter of 2010 during which $6.9 billion was invested in connection with 962 deals. PWC and the NVCA attributed the decrease in dollars invested to the absence of large rounds in the clean tech sector, and noted that venture investors continue to invest more into first-time deals than follow-on rounds. Of the 780 deals funded in the third quarter, 271 (35%) were early stage financings.  Of the $4.8 billion invested, almost $1.3 billion (26%) was invested in early stage deals. Michael Greeley, general partner of Flybridge Capital Partners, says the report is good news for start-ups.  Greeley, quoted in Xconomy, observed that “the amount of first-time financings is a great barometer for the health of the industry.  That really is probably the most risky investment that venture capitalists are asked to make. To see that over a quarter of those dollars went into those types of companies, I think was quite, quite encouraging. We also shouldn’t lose sight of the fact that July and August are historically pretty slow months.” Other highlights of the MoneyTree Report: The software industry was the top recipient of venture dollars with $1 billion going into 190 rounds.  Those numbers equal a 13% drop in dollars and a 21% drop in deals compared to the second quarter. The biotech industry raised $944 million in 108 deals, a 32% drop in dollars and a 29% drop in deals compared to the second quarter.  Medical devices and equipment companies raised $573 million in 82 deals, a 27% drop in dollars and an 18% drop in deals compared to the second quarter. The clean tech sector raised $625 million in 58 deals, down from $1.5 billion in 78 deals in the second quarter. Internet-specific companies raised $661 million in 154 deals in the third quarter, a 25% drop in dollars and a 28% drop in deals compared to the second quarter. This post was authored by Jonathan Shapira.

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