VC Dollars Rise Above Pre-Recession Level in MoneyTree’s Second-Quarter Survey

7/20/11Follow @bvbigelow

Venture capital activity improved slightly year-over-year, with a total of $7.5 billion invested in 966 new companies nationwide during the quarter that ended June 30th, according to the MoneyTree Report released today.

Investment levels represented the highest quarterly total since the pre-recessionary second quarter of 2008, according the report, which is prepared by the National Venture Capital Association (NVCA) and PricewaterhouseCoopers, based on data from Thomson Reuters. The partners are expected to release details on regional venture activity trends later today.

The $7.5 billion invested during the quarter represented an 18.7 percent increase over the previous quarter, when $6.3 billion was invested across the country, according to the report. The 966 deals also represented an 18.6 percent gain over the 814 deals done during the first quarter. Compared to the same quarter in 2010, however, the numbers appeared less impressive, amounting to a 5 percent increase in dollars (from nearly $7.2 billion) and a 3 percent decline in deals (from 998).

In a similar way, the MoneyTree Report highlighted the $2.08 billion in financing that went to 206 biotech and medical device and equipment-makers during the quarter, saying it represented a 37 percent increase in dollars and a 12 percent gain in deals compared to the previous quarter. A year-over-year comparison, however, shows a 2.7 percent decline (from $2.14 billion invested) and a 21 percent decline (from 261) in deal volume from the second quarter of 2010.

The single biggest deal of the quarter involved the Boston-based online retailer CSN Stores, which raised $165 million from Battery Ventures, Great Hill Equity Partners, HarbourVest Partners and Spark Capital. The second biggest was a $138 million investment in the Gilt Groupe, another e-commerce provider based in New York, followed by a nearly $115 million venture round for Fisker Automotive, the Anaheim, CA-based electric vehicle maker.

The latest numbers in the MoneyTree Report’s roughly correspond with the second quarter venture activity measured last week by the New York financial data firm CB Insights, which counted $7.6 billion in 768 startups nationwide. But unlike the MoneyTree Report, CB Insights showed a substantial increase in year-over-year dollars and deals. The data varies between the rival surveys because each firm relies on different sources, and uses different ways to count and categorize venture deals.

Some highlights of the MoneyTree data:

—Software was the biggest and busiest industry for venture capital during the second quarter, with $1.5 billion going into 254 deals, according to the MoneyTree Report. That was a 19 percent increase over the $1.3 billion that venture firms invested in software during the same quarter last year, with the number of deals relatively unchanged from 257 rounds done in the year-ago quarter. A comparison with the prior quarter looked better. The report said venture capital invested during the second-quarter was a 35 percent increase over the $1.1 billion invested, and a 25 percent increase over the 203 rounds completed during the first three months of 2011.

—Almost $1.4 billion was invested in a total of 189 Internet specific deals during the most-recent quarter. That was a 29 percent increase over the $1.05 billion invested in the same quarter last year and a 16 percent decline in the 225 deals.

—The MoneyTree Report counted $942.5 million and 81 deals in Q2 venture funding in the clean technology sector, a cross-category compilation that includes investments in alternative energy, pollution and recycling, power supplies, and conservation. That was a 36 percent drop from the $1.48 billion invested, and a 6.5 percent uptick from the 76 deals done in the same quarter last, according to MoneyTree data. It also was down from the prior quarter, when $1.2 billion was invested in 73 deals.

—Seed and early stage venture deals accounted for $2.4 billion and 464 deals during the quarter. The average seed deal was $3.2 million, up from $1.8 million in the first quarter. The average early stage deal was $5.8 million, down slightly from $6 million in the prior quarter.

—Expansion deals accounted for $2.3 billion and 260 deals, according to the MoneyTree survey. The average expansion stage deal was $9 million, down from $9.3 million in the previous quarter.

—Investments in later-stage venture deals amounted to $2.8 billion and 242 rounds. The average later-stage deal during the second quarter was $11.5 million, up from $10.8 million in the prior quarter.

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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