December Surge of Internet Deals Carries Venture Capital to Two-Year High

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the recent past, especially when it comes to tech,” CB Insights co-founder Anand Sanwal said in an e-mail. “The momentum and valuations of some breakout companies like Facebook and Groupon, coupled with the hopes of a healthier M&A and even an IPO market, have investors feeling more bullish. But it’s worth remembering that the 2010 total of $23.7B, while better than 2009, is lower than the annual totals seen between 2006-2008.”

CB Insights provides the big picture in their snapshot of venture investing, and more details on deals and funding in Xconomy cities is expected when rival surveys come out in the MoneyTree Report and from Dow Jones VentureSource. In the meantime, here are some other bullet points from CB Insights’ report:

—Venture funding for Internet companies soared by more than 71 percent during the quarter, to more than $2.54 billion from $1.48 billion in the fourth quarter of 2009. Again, those four big deals in December account for most of the difference. A better indicator might be the deal count, which increased by 21 percent year-over-year, to 272 deals from 224 deals.

—Venture funding for healthcare companies fell by almost 16 percent, to more than $1.5 billion from $1.8 billion in the fourth quarter of 2009. The deal count increased slightly, to 173 from 169, year over year.

—Venture funding for what CB Insights calls Green Tech/Clean Tech increased almost 40 percent during the quarter, to $790 million from $565 million. The deal count, though, remained relatively flat, increasing to 59 from 55 in the fourth quarter of 2009. CB Insights noted that the deal count for early stage cleantech investments declined to a five-quarter low, while the top two areas for investment continue to be companies specializing in renewable energy and energy efficiency. Three of the top 10 green deals in the quarter were in Colorado.

—Among the top states, the most venture activity continued to take place in California, which accounted for 42 percent of the 735 deals and 40 percent of the $6.5 billion invested. Massachusetts had 11 percent of the deals and 10 percent of the overall funding, while the state of Washington had 4 percent of the deals and 2 percent of the funding. (Michigan, alas, was not among the top five states for venture activity that CB Insights analyzed.)

—Among states, CB Insights noticed that New York could be gaining ground on Massachusetts (at least in some respects) as the second-busiest region for venture activity. For the quarter just ended, the report found that $630 million was invested in 78 deals in Massachusetts, while $466 million was invested in 66 deals in New York State. Throughout 2010, venture capitalists invested almost $2.7 billion in 336 deals in Massachusetts, while nearly $1.4 billion was invested in 220 deals in New York. But the differences are narrowing in certain sectors. Over the past five quarters, CB Insights says it counted $1.22 billion in funding for 208 tech deals in New York, versus $1.21 billion in funding for 207 companies in Massachusetts. “The margin of victory for NY is ever so slight,” CB Insights says, “but most striking is the trend for both states, which are going in very different directions.”

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