Deal Count Rises, But Third Quarter VC Funding Lags Behind ’11 Pace

10/17/12Follow @bvbigelow

Venture capital activity continued apace during the third quarter, with $7.5 billion invested in 835 deals nationwide—the highest deals tally since the dot-com era. But the overall funding total for 2012 is expected to decline from the $30.7 billion invested in 2011, according to a report today from New York financial data firm CB Insights.

Venture firms have invested about $21.5 billion through the first three quarters of 2012, according to CB Insights. The firm predicts that 2012 will therefore be a down year, unless fourth-quarter venture funding soars to $9.2 billion—and CB Insights says, “we’ll bet a healthy sum of money that it won’t.”

The $7.5 billion that VC firms invested during the three months that ended Sept. 30 marked a 5 percent decline from the same quarter of 2011, when VCs provided $7.9 billion in funding, and a 7.4 percent decline from the $8.1 billion invested during the previous quarter. But CB Insights also notes that the 835 deals was the most since the “dot-com days” of 2001. The spike in deals was apparently driven by a growing VC preference for making seed investments in fledgling companies.

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Seed investments accounted for 31 percent of all VC deals that CB Insights counted during the quarter. Investments in mobile startups were particularly strong, with seed investments in mobile and telecom startups representing 42 percent of all mobile deals. CB Insights analysts said one explanation for the high number of seed deals is that individual investments at the seed stage are relatively small and pose little systemic risk to venture funds.

Venture investors also showed a … Next Page »

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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