Thursday, April 21, 2011

Venture capital dollars up, deal activity flat

By Galen Moore

For the second quarter in a row, U.S. venture capital investment dollars are up by double digit percentages over a year ago, according to a report issued this morning by Dow Jones VentureSource. It’s the first time the industry has strung together two consecutive quarters of significant growth since the 2008-2009 recession.

VCs put $6.4 billion to work in U.S. companies in Q1, a 35 percent increase over Q1 2010, VentureSource reported. Deal activity, however, stayed nearly flat, growing only 5 percent, to 661 deals.

In a statement this morning, VentureSource research director Jessica Canning put the trend down to a string of large deals in capital-intensive industries like health care, information technology and renewable energy. Corporate VC also got into the game, spurred by an M&A that heated up in the quarter, raising prices to acquire venture-backed companies, Canning said.

Venture-backed companies in New England beat the national average, raising $903 million, according to VentureSource - 71 percent more than the amount raised from VCs in Q1 last year. However, Q1 followed a disappointing fourth quarter, in which VCs invested $599 million, about half the amount invested in New England companies in Q4 2009.

The number of deals done in New England also grew better than the nation, rising to 82, compared to 69 in the year-ago period.

Health care was the biggest category in New England, by far, with $397 million invested. Information technology and renewable energy were the next largest investment category, with $156 million and $151 million, respectively. 

New York, meanwhile, saw $669 million invested over 73 deals; The San Francisco Bay Area had 190 deals on the quarter, totaling $220 million.

Other venture industry trackers' Q1 reports, released in the past two weeks, saw the New England region’s dollar total falling short of the number set in the first quarter of 2010.