Study: Venture investment rose 22% in 2011

Venture capitalists opened their wallets wider in 2011, investing $28.4 billion, up 22 percent, in 3,673 deals, up 4 percent, according to a MoneyTree Report today.

Fourth-quarter investments totaled $6.6 billion in 844 deals, down 10 percent in dollars and an 11 percent decline in deals from the third quarter of 2011. The report is by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA), based on data from Thomson Reuters.

By region, Silicon Valley topped investments for the full year with $11.6 billion, with New England following a distant second with $3.2 billion and New York Metro at $2.7 billion. By state in the fourth quarter, California again dominated with $3.78 billion in 340 deals, up from the $2.75 billion in the fourth quarter of 2010 but down from the 346 deals a year ago. Massachusetts ranked second at $740.69 million in 91 deals. That’s higher than the $541 million invested in last year’s comparable quarter, with the same number of deals.

Cleantech and the Internet showed double-digit gains in dollars in 2011. Dollar investment also increased across every stage of development except for the 48 percent decrease in seed stage money. First-time financings rose in 2011 compared to the prior year, but fourth quarter investing showed a decline in both first-time dollars and deals when compared to the third quarter of 2011.

“Venture capital investing in 2011 exceeded 2010 levels and ranks in the top three years for VC investing in the past decade,” Tracy T. Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, said in a statement.

“It is important to note that deal volume growth did not keep pace with dollar growth,” added Mark Heesen, president of NVCA, in the release. “In most industry sectors, round sizes increased significantly, driving the higher investment levels across most stages of investment.” He said the reasons differ depending on area of investment. In some cases, he said, the higher rounds are driven by the challenging exit market, which requires venture capitalists to fuel their existing portfolios longer and at higher investment levels than in the past. “This is particularly acute in the life sciences and clean tech sectors,” he said. In other sectors such as the Internet, software, and media, the higher rounds are related to increasing valuations.”

By industry, medical devices rose 20 percent in dollars and fell 2 percent in deals in 2011, finishing the year as the fourth-largest sector with $2.8 billion going into 339 deals. The life sciences sector (biotech and medical devices combined) accounted for 27 percent of all venture capital dollars invested in 2011 compared to 27 percent in 2010.

Cleantech rose 12 percent in both dollars and deal volume in 2011, bringing the year’s total to the highest level ever recorded at $4.3 billion going into 323 deals, compared to $3.8 billion going into 289 deals in 2010. Cleantech investing accounted for 15 percent of all venture capital dollars in 2011 compared to 16 percent in 2010.


By Lori Valigra

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Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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