Q4 Venture Deals, Dollars Stayed Strong, Making 2011 Best in a Decade

Xconomy National — 

Venture capital deals backed off just a tad during the last three months of 2011, but remained strong enough to carry VC activity during the year to a new high-water mark, according to data being released today by CB Insights, a financial data firm that maintains a venture capital database.

VCs invested $7.6 billion in 755 companies nationwide during the fourth quarter, bringing the total for 2011 back to pre-recession levels, with $30.6 billion invested in 3,051 deals. The New York firm says that marks a 10-year high for both dollars and number of deals.

In the regional breakdown, Massachusetts regained its No. 2 ranking, eclipsing venture activity in New York during the fourth quarter. CB Insights reports that a total of $959 million was invested in 93 Bay State deals. In New York, $568 million went into 73 deals, which ranked third in terms of both deals and dollars.

California maintained its usual poll position during the quarter, with the $3.8 billion invested statewide accounting for just over half of the nationwide total and the 300 deals representing 40 percent of the total U.S. number. There wasn’t a lot of variation in California’s deal count over the previous four quarters, but the capital invested during the quarter was 45 percent higher than the $2.6 billion that went into the Golden State during the same quarter of 2010.

In Washington State, venture activity remained well behind the big three, with $146 million invested in 24 deals during the quarter, prompting the wags at CB Insights to write, “We’ll bring back our ‘Sleeping in Seattle’ metaphor as Washington continued its multi-quarter deal flow slide and also came down on funding.” During the same quarter last year, VCs put $119 million into 28 deals in the Evergreen state.

In their sector analysis, CB Insights says venture investments in healthcare-related startups rebounded during the quarter, but not dramatically. The $1.895 billion that VCs deployed during the quarter was marginally better than the $1.894 billion counted during the second quarter of 2011.

The number of fourth-quarter deals—172—was a high for 2011, but comparable to the 173 healthcare deals that CB Insights counted in the same quarter of 2010. After three quarters of declining deal volume, though, it was an overall improvement.

CB Insights says the biggest healthcare deals of the quarter were:

Portola Pharmaceuticals (San Francisco)

Agios Pharmaceuticals (Cambridge, MA)

Rempex Pharmaceuticals (San Diego)

Sensors for Medicine & Science (Germantown, MD)

Dermira (Redwood City, CA)

Cleave Biosciences (Burlingame, CA)

Internet startups got the most love from VCs, with the $2.5 billion invested during the fourth quarter accounting for a third of the capital deployed nationwide and the 283 deals representing 37 percent of the total number of deals. Those numbers were in line with the same quarter last year but down from the previous quarter.

The biggest Internet deals were:

Dropbox (San Francisco)

LivingSocial (Washington DC)

WhaleShark Media (Austin, TX)

Box.net (Palo Alto, CA)

Venture funding for green and cleantech companies remained modest, with nearly $1.3 billion invested in 69 deals nationwide. Companies developing renewable energy technologies accounted for the sector’s biggest share (almost a third of the deals, and nearly half of the dollars). Energy storage companies got the second-largest share of funding (6 percent) and energy efficiency companies accounted for the next highest number of deals (12 percent).

Better Place (Palo Alto, CA)

Stion (San Jose, CA)

Soraa (Fremont, CA)

eRecyclingCorps (Irving, TX)

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2 responses to “Q4 Venture Deals, Dollars Stayed Strong, Making 2011 Best in a Decade”

  1. Steve Patterson says:

    My view is that an average of $30B/year is too much and will reduce returns and reduce the amount invested in VC partnerships by LP’s. The real question is are the buy side money managers who buy the IPO’s making a good return and are the acquirers of portfolio’s making a good return. Headline is misleading – for most VC other than a small group like Greylock, Accel, Sequoia, it was not a good year for returns and measuring the checks written is meaningless.

    Have a look – The Limits of Venture Investing http://stevep2007.wordpress.com/2011/12/27/venture-capital-is-not-in-a-crisis-just-in-a-market-correction/