Looking Up: First Quarter Venture Capital Deals & Dollars Rise

Xconomy National — 

Venture capital investments surged during the first three months of 2011, driven mostly by sharply increased funding for Internet and cleantech-renewable energy startups, according to CB Insights, a New York information and data services firm.

Venture investors sunk a total of $7.5 billion into 738 deals throughout the country during the first quarter, a 27 percent increase in dollars (with no significant change in deals) over the same quarter of 2010, when CB Insights reported $5.9 million in 730 deals. The $7.5 billion invested also was 15 percent higher than the $6.5 billion that went into 735 deals during the preceding quarter—which represented a two-year high water mark in both deals and dollars invested.

CB Insights says the consecutive quarterly increase in funding levels and deal flow is back to “pre-recession levels,” but left it to others to decide whether that represents a return to normalcy or an untenable VC investment bubble. The firm says most of the increase was due to substantial increases in funding levels for Internet companies and in the cleantech-renewable energy sector.

First-quarter venture funding for Internet startups amounted to $2.3 billion in 286 deals. That was an 83 percent increase in capital and a 29 percent increase in deals over the first quarter of 2010, when VCs put almost $1.3 billion in 221 deals. For reasons I still don’t understand, CB Insights split Chicago-based Groupon’s $900 million financing in December into two parts, counting half during the fourth quarter of last year and the other half in the first quarter of this year. Other notable Internet deals include $70 million for AppSense (based in the U.K. and New York) and $53.6 million for Indianapolis, IN-based Angie’s List.

In the cleantech and renewable energy sector, more than $1.9 billion was invested in 86 deals during the quarter. That was a 46 percent increase in dollars over the first quarter of 2010 (with no change in deals), when $1.3 billion flowed to 85 companies. Some notable deals: Almost $202 million for Oakland, CA-based BrightSource Energy, $150 million for Irvine, CA-based Fisker Automotive, and almost $52 million for Waltham, MA-based Harvest Power.

California—especially Northern California—continues to dominate as the overall No. 1 region for venture capital dollars, accounting for 52 percent of the $7.5 billion invested nationwide and 39 percent of the 738 deals.

Some other details from CB Insights’ data:

—Although California got most of the money and the biggest share of venture deals, CB Insights noted that venture capital funding continues to strengthen in the Boston-New York corridor. Massachusetts claimed 10 percent of the $7.5 billion invested during the quarter, and 12 percent of the deals. New York got 6 percent of the capital invested and 10 percent of the deals. Washington State remained flat, with 2 percent of the funding and 4 percent of the deals. (CB Insights breaks out its results for five states—California, New York, Massachusetts, Texas, and Washington—but not for regional or metropolitan areas.)

—New York has been claiming more tech dollars, and still ranks No. 2 (behind California, but ahead of Massachusetts) for technology investments. Counting all types of venture deals, New York claimed $447 million in 77 deals during the first quarter of 2011. That was a 40 percent increase in funding and a 31 percent gain in deals over the $319 million that went into 55 deals during the first quarter of 2010.

—First-quarter funding in Massachusetts amounted to $719 million in 85 deals. That was a 20 percent decline in venture funding from the same quarter last year, when venture investors put $898 million into 87 deals.

—The percentage of deals based on investment stage remained consistent with the previous quarter. About 10 percent of the total were seed-stage deals and 36 percent were counted as Series A deals. About 1 percent of the capital was invested in seed stage companies, with 17 percent going to Series A deals.

—Healthcare deals were down for the quarter as well as year-over-year. VCs put almost $1.6 billion into 150 healthcare deals nationwide. That was an 11 percent increase in funding and a 13 percent decline in deals compared to the same quarter of 2010, when investors put $1.4 billion into 173 companies nationwide.

—Among all deals and dollars invested, CB Insights found that the share of healthcare deals declined to 20 percent from 24 percent in the previous quarter (and from 24 percent in the first quarter of 2010). Healthcare also got a smaller slice of the venture dollars invested, declining to 21 percent from 24 percent in the previous quarter (and from 24 percent in the first quarter of 2010).

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2 responses to “Looking Up: First Quarter Venture Capital Deals & Dollars Rise”

  1. Ashley says:

    Very interesting reading, thank you Bruce and Xconomy for this very comprehensive analysis.

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