Thursday, January 13, 2011

Report: VC deals, dollars up in 2010 on strong Q4

By Galen Moore

If you were looking for a bright spot after Wednesday’s dismal venture capital (VC) fund-raising report from Dow Jones VentureSource, numbers released this morning by competing industry tracker CB Insights may provide it: VCs are writing more checks and putting more dollars into startups.

VC firms in 2010 were slow to bring money in: the asset class hit a seven-year low. But the new numbers from CB Insights indicate that as investors, VCs were more aggressive in 2010, with their financing numbers pushed up by a fourth-quarter spike. Overall, CB Insights reported $23.7 billion into U.S. venture-backed companies in 2010, over 2,792 – 14 percent growth in dollars and 13 percent growth in deals over 2009, a recent bottom for venture industry investing activity.

Q4 2010 was reported the industry’s best quarter in the past eight, as measured in both deals and dollars: according to CB Insights, VCs did 735 deals worth $6.5 billion, the most dollars and the most activity since the beginning of 2009. The state of Massachusetts claimed a 10 percent share of the dollars and an 11 percent share of the deals reported by CB Insights, down slightly from earlier quarters. California had 42 percent of the Q4 deals and 40 percent of the dollars, also a slight decrease, according to CB Insights; New York State claimed 9 percent of the deals and 7 percent of the dollars, a slight increase.

As Mass High Tech reported Wednesday, Massachusetts’ share of high-tech investment dollars has fallen, while New York’s has been on the rise. Over the past five quarters, both states saw $1.2 billion in venture financing for high-tech companies. Massachusetts saw 207 such financing deals; New York, 208. CB Insights defines high tech as encompassing Internet, mobile, software, computer hardware and electronics. 

VC activity in life sciences rose modestly in 2010 over 2009, but dollars were down almost 16 percent, CB Insights reported – after a two-year period during which several VC industry trackers noted life sciences investments surpassing high tech for the first time. However, early-stage activity in life sciences hit a five-quarter high. In the fourth quarter, Massachusetts’ share of life sciences deals fell to a five-quarter low – 13 percent – while dollars remained healthy at 16 percent, CB Insights reported. The industry tracker had Cambridge as the biggest city in the union for life sciences VC investing, with nine deals totaling $143 million in the quarter.