Second-Quarter VC Activity: Wish They All Could Be California Deals

7/14/11Follow @bvbigelow

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the second quarter of 2010, when VCs invested nearly $1.62 billion in 233 Web startups.

—By almost every measure, VC activity in cleantech declined during the second quarter. The $781 million invested was a 25 percent drop from the $1.046 billion invested during the same quarter of 2010, but the 65 cleantech deals represented an 18 percent increase over the 55 deals from the same quarter last year. Cleantech also fell sharply compared with the previous quarter, which was a high water mark with more than $1.9 billion going into 86 deals.

—Healthcare investments showed new signs of life, with $1.9 billion invested in 147 startups during the second quarter. That’s the most capital to be invested in healthcare for at least a year. During the same quarter in 2010, VCs invested over $1.6 billion in 138 healthcare deals. In the first quarter of 2011, VCs invested almost $1.6 million in 150 deals.

—One of the most noticeable trends is a contraction of most venture activity into three states—California, Massachusetts, and New York—where the gravitational pull of innovation clusters and venture capital landed over 60 percent of the deals and more than 75 percent of the funding during the three months that ended June 30.

—California, as usual, accounted for the single biggest slice of venture capital funding, with nearly $3.66 billion (almost half of the nationwide total) invested in 336 deals. VC investments in Internet companies and healthcare together accounted for 58 percent of the state’s deals and 56 percent of the funding. The Golden State’s endless summer of venture activity apparently inspired the analysts at CB Insights to observe, “I wish they all could be California deals.”

—In Massachusetts, venture investors sank more than $1.1 billion in 89 deals statewide, marking a five-quarter high in both deals and dollars. In comparison to the same quarter in 2010, it was a nearly 66 percent gain in dollars (up from $689 million) and a 6 percent increase in deals (from 84).

—In New York, $539 million was invested in 61 deals. It was a nearly 52 percent rise in dollars (from $355 million) compared with the same quarter last year and a 27 percent increase in deals (from 48).

—The percentage of seed stage deals nationwide climbed to 12 percent, which was a five-quarter high for the earliest stage category of venture funding. The strengthening trend of seed stage deals remained steady across the Internet, healthcare, and cleantech sectors, but the overall amount of VC funding for early stage companies dipped to a five-quarter low, primarily due to a dearth of Series A deals.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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