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

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clear preference for mobile deals during the quarter, with $968 million invested in 116 deals nationwide. In its analysis, CB Insights says, “VCs clearly are positioning themselves for the next big wave they see in mobile.” The $968 million in mobile investments throughout the U.S. represented a 75 percent gain over the $553 million that went to mobile deals during the same quarter of 2011—and was 45 percent higher than $669 million invested in mobile during the previous quarter.

On the other hand, venture activity in cleantech startups continued to wane nationwide. CB Insights said $698 million was invested in 47 deals during the third quarter—contrasting sharply with almost $1.5 billion that VCs invested in 49 deals in the previous quarter. During the same quarter last year, venture investors provided $1.2 billion in funding to 70 startups nationwide.

Healthcare, which has traditionally been one of the biggest sectors for venture capital activity, continued to weaken—extending a declining trend of the last several quarters. The almost $1.6 billion that was invested in 134 deals represented a 7 percent decline from the almost $1.7 billion invested in 143 deals during the same quarter a year ago, although it was a slight uptick from the previous quarter, when VCs put more than $1.5 billion in 142 companies.

California maintained its usual No. 1 rank in terms of dollars and deals, with almost $3.9 billion invested in 366 deals during the third quarter. The amount of funding was up slightly from more than $3.8 billion that went into 315 deals during the same quarter in 2011, and was down about 17 percent from the nearly $4.7 billion invested in 363 deals during the previous quarter.

In a breakout of data showing venture activity for Southern California, CB Insights reports that venture investors provided $695 million in 70 deals in eight metropolitan areas, which include Los Angeles and Orange County, San Diego, Riverside, San Bernardino, Oxnard, Thousand Oaks Ventura, Bakersfield, Santa Barbara, and San Luis Obispo. The Southern California region would rank third in terms of capital invested—behind Massachusetts, where $847 million went into 84 deals, but ahead of New York, where $489 million flowed to 86 companies. Of course, even as a subset of California, Silicon Valley would outdistance all others, with an estimated $3.2 billion invested in roughly 296 companies.

Another noteworthy trend inside California is that venture activity in the mobile sector eclipsed healthcare for the first time. The Internet still represents the state’s biggest sector for venture activity, accounting for 43 percent of the nearly $3.9 billion invested and 48 percent of the 116 deals. Yet the mobile and telecom sector ranked as the second-biggest slice of the pie, with 16 percent of the dollars and 17 percent of the deals. California’s healthcare sector had 13 percent of the dollars and 10 percent of the deals.

In Washington state, CB Insights counted $132 million and 24 deals—less than half the $312 million that was invested in 32 startups during the previous quarter. It also was down significantly from the third quarter of 2011, when VCs invested $197 million in 28 startups.

Additional details on third-quarter venture investments are expected later this week in the MoneyTree Report prepared by the National Venture Capital Association, Thomson Reuters, and PricewaterhouseCoopers. The reports aren’t really comparable, because each uses different sources and methods of counting, and they often categorize VC deals in different ways. But it is always interesting to see if the general trends line up between the reports, and where they differ.

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