Despite an overall increase in venture capital spending compared with the previous quarter, the irregular VC trends continued in the second quarter of 2012, both nationally and in the New York metro area, according to a MoneyTree report based on Thomson Reuters data.
The total amount of money invested nationally increased 17 percent compared with the first quarter, with $7 billion invested in 898 deals.
But with relatively low funding levels in the first quarter, the year”™s totals are still projected to fall short of the $30 billion invested in 2011, yet exceed the $23 billion invested in 2010, Tracy Lefteroff, a PwC global managing partner, said in a press release. PwC and the National Venture Capital Association assembled the report.
The New York metro area saw VC dollars increase 52 percent this quarter ”“ with $567 million invested in 100 companies ”“ but compared with this time last year, spending is still down percent.
Software and information technology companies received the most capital, while companies in the life sciences and clean technology sectors saw continued decreases.
At the national level, VC dollars to the software industry increased 38 percent from last quarter to $2.3 billion, which is the highest quarterly total since 2001.
VC investment in the life sciences, which includes biotechnology and medical device companies, decreased for the second consecutive quarter, falling 9 percent to $1.4 billion. Quarterly funding to biotechnology firms was at its lowest level since 2003.
“I think it”™s more of a reflection that the Internet is a very hot area right now,” said David Silverman, a PwC partner. “It”™s always been an area of investment since the mid ”™90s.”
But with the success of social media and evolving e-commerce models, such as daily deal websites and better online catalogues, there has been an uptick in interest. Plus, with relatively efficient models and low operating costs, Internet companies can be an attractive investment compared to a costly life sciences project.
In the New York metro area, 47 percent of VC funding went to software and IT services companies, totaling $264.2 million invested in 44 companies.
While the New York metro”™s funding and industry mix mirrored national trends this quarter, it differed in what stage of development companies receiving funds were classified.
Roughly half of all New York metro deals went to companies in the expansion stage, while 35 percent went to those in the seed or early stage.
Nationally, the majority of funding went to companies in seed or early stages. Funding for companies in the latter two stages increased in dollars and the number of deals this quarter, accounting for 53 percent of the total deal volume. Only 26 percent of deals were in the expansion stage.
“New York continues to demonstrate a very healthy mix of stage of investment funding,” Silverman stated. “With a significant portion of deals and dollars focused on the early stage, (we”™re) providing ample opportunity to and for young startups, followed by strong funding in the expansion stage to enable the continued growth of these companies.”
Connecticut companies garnered just $13 million in funding across eight deals. All but one of the eight were included in the New York metro data. In Norwalk, an expanding software company received $2.4 million and in Stamford a startup medical device company received $1 million.
“Venture capital continues to be invested in Connecticut biotech, medical device, IT and software companies,” said Owen Davis, a PwC partner in Stamford. “However, the number of deals in Connecticut this quarter is disappointing. In addition, the dollars invested are not keeping pace with national venture capital investment levels.”
