NEW YORK – Investors put $6.4 billion into 661 deals for U.S.-based venture companies during the first quarter of 2011, a 35% increase in investment and 5% increase in deals from the same period last year, according to Dow Jones VentureSource. The median amount raised for a round of financing during the first quarter was $5 million, up from the $4.4 million median a year earlier but on par with the 2009 median.
“Large deals for capital-intense industries — such as renewable energy, healthcare and information technology — drove the investment increase in the first quarter,” said Jessica Canning, global research director for Dow Jones VentureSource. “Venture capitalists, however, were not the only investors giving venture-backed companies sizable cash infusions. With acquisition prices on the rise, corporations are more inclined to invest and they funded three of the 10 largest deals confirmed during the quarter.”
Corporations were the source of $448 million of the $6.4 billion raised by venture-backed companies.
Enterprise Start-Ups Do More Deals As Their Consumer Counterparts Raise More Capital
Business and Financial Services companies raised $935 million for 125 deals during the first quarter, 17% more capital and 21% more deals than the same period a year earlier. Investment in advertising technologies and services accounted for the largest proportion of deals in this segment. In the most recent quarter, advertising companies raised $306 million for 43 deals.
Consumer Services companies raised $1.2 billion for 106 deals in the most recent quarter, more than double the $517 million raised for 102 deals during the same period last year. The Web-heavy Consumer Information Services sector, which includes social media, gaming and online shopping companies, claimed most of the Consumer industry’s investment as these companies raised $875 million for 81 deals. This was almost triple the amount raised during the same period last year, but deal flow increased just 7%.
“Investment in consumer-focused Web companies is taking off but only for a select few,” said Scott Austin, editor of Dow Jones VentureWire. “A handful of large rounds are boosting the total amount of capital invested but the median amount raised by consumer companies is a reasonable $4 million. That’s not far off from the first quarter of last year and is less than half of the median round sizes we saw in 2000 leading up to the implosion of the dot-com bubble.”
Healthcare Deals Slow, Software Investments Boost IT
Deals for Healthcare companies slowed 6% but capital invested rose 21% as 148 deals raised $1.6 billion in the most recent quarter. The industry’s smallest sectors – Healthcare Services and Medical IT – were the only two to see an increase in deals as they raised $75 million for 14 deals and $44 million for 13 deals, respectively. As usual, Biopharmaceuticals took the lion’s share of investment, raising $849 million for 61 deals, a 13% drop in deals and 15% increase in capital invested. Medical Devices, the industry’s second-largest sector, raised $635 million for 60 deals, a 14% drop in deals and 31% increase in capital raised.
Information Technology (IT) companies raised $1.6 billion for 212 deals, a 10% increase in deals and 16% increase in capital invested. Investment in the Software sector has renewed as venture capitalists have shown more interest in enterprise technologies. Software companies closed 152 deals for $741 million, a 24% increase in deals and 10% increase in capital invested.
Renewable Energy Companies Close Large Rounds
The Energy and Utilities industry raised $742 million for 33 deals, almost double the capital raised during the same period last year. Large deals completed in the Renewable Energy sector drove the spike in capital invested. Six Renewables companies raised rounds that were $50 million or larger, with two of those companies completing rounds of $100 million or more. In total, 26 Renewable Energy deals raised $671 million.
Early-Stage Rounds Account for 38% of Deals
Seed- and first-rounds accounted for 38% of deals and 16% of capital invested during the first quarter, a slight change from last year when early-stage rounds claimed 39% of deal activity and 20% of capital raised. Later-stage deals accounted for 40% of the quarter’s deals and 64% of total capital raised in the first quarter, up from the same period last year when later-stage deals accounted for 35% of deals and 54% of capital raised.