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Some Q3 Megadeals Amid Decline in U.S. VC Activity: Behold the Top 10

Xconomy National — 

Venture firms invested $6.48 billion in 890 deals throughout the United States during the three months that ended September 30, according to the MoneyTree Report being released today by the National Venture Capital Association (NVCA) and PricewaterhouseCoopers.

Venture activity remained strong during the third quarter in the software sector, but funding for life sciences and cleantech startups continued to lag, according to the report, which is put together from data provided by Thomson Reuters.

“The headline is that dollars are down and deal volume also is down,” says Jon Callaghan, who oversees software and technology investments at San Francisco-based True Ventures. “But if you get into it a little deeper, the numbers are still really strong.”

A handful of colossal deals helped do the heavy lifting. San Francisco-based Square alone raised $200 million from venture investors during the quarter, and there were four other $100 million-plus deals pitching in. (A deals list is below.)

Mobile computing, in particular, is remaking the infrastructure of the Web, Callaghan told me in a phone interview yesterday. “There’s a lot to be excited about,” Callaghan says. “One of the over-arching themes of this era of venture investing is capital efficiency. Entrepreneurs can build an awful lot of product for very little money.”

According to the MoneyTree Report, the almost $6.5 billion that VCs invested during the third quarter was down 11 percent from the same quarter in 2011, when over $7.3 billion was invested in 992 deals. Venture funding during the third quarter also was off 10 percent from the previous quarter, when venture firms put nearly $7.3 billion into 935 deals.

There are clear signs that VC activity is softening, and the overall venture funding level will clearly be lower in 2012 than it was in 2011, according to John Taylor, the NVCA vice president of research. CB Insights, a New York financial data firm, reached the same conclusion in a rival study released earlier this week.

“When you look at what industry is the strongest, software absolutely stands out,” Taylor told me by phone yesterday. Nevertheless, he says, “There’s a general apprehension in the economy about what’s ahead. There’s also general angst about the fiscal cliff and about what’s ahead, and what the tax rates will be.”

Tracy Lefteroff, the global managing partner of PricewaterhouseCoopers’ venture capital practice, echoes Taylor’s concerns in today’s statement: “We’re seeing fewer new venture funds being raised, which means less capital is available for new investments. And we’re seeing venture capitalists be very cautious with the capital that is available due to the lack of a significant number of liquidity events. Instead venture capitalists are continuing to support the companies already in their portfolio.”

Without the big deals, the quarter would have looked very different. The top 10 deals of the quarter were:

Square, San Francisco; $200 million

Box, Los Altos, CA; $125 million

Elevance Renewable Sciences, Woodridge, CA; $104 million

Fisker Automotive, Anaheim, CA; $103.7 million

Fab.com, New York; $100.8

GitHub, San Francisco; $99.5

Social Finance, San Francisco; $77.2 million

Just Fabulous, El Segundo, CA; $76 million

Protean Electric, Auburn Hills, MI; $72.6 million

Quirky, New York; $68 million