That was the broad finding from the latest MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. The report calculated that VCs invested $7.0 billion in 898 deals in the second quarter of 2012, up 17% in terms of dollars compared to the first quarter, when firms invested $6.0 billion in 809 deals.
“Overall it’s got a positive bias. We’re seeing increasing flows of venture capital being deployed,” said Tracy Lefteroff, managing partner of PwC’s venture capital practice, regarding the quarterly numbers. Drilling down into individual sectors, however, the picture is more muddled, with sharp increases in investment in some areas, and cutbacks in others.
Software and Internet stood out as favored sectors. The software industry received the highest level of funding in all categories tracked, with $2.3 billion invested during the second quarter, the highest total since Q2 of 2001. The sum invested represents a 38% increase from the first quarter, when VCs invested $1.7 billion into software deals. Internet-specific companies (a classification for companies with business models fundamentally dependent on the Internet) also received more money during the second quarter, with total investment rising 22% from the prior quarter to $1.8 billion.
Life sciences companies faced a more challenging funding climate. Investment in the space declined in the second quarter, with $1.4 million invested, down 9% from the prior quarter. It was the fourth consecutive quarter of declining investment for life sciences companies, and in particular the biotechnology sector, where $697 million went into 90 deals, representing the lowest quarterly total for the industry since the first quarter of 2003. The medical devices and equipment industry received $700 million in the second quarter, more or less on par with the prior quarter.
The clean technology sector, meanwhile, saw an 8 percent increase in dollars but experienced a 28 percent decrease in deal volume with $1.0 billion going into 55 deals during the second quarter compared to $962 million going into 76 deals in the prior quarter. The dollar increase was driven by several large rounds, with four of the quarter’s top 10 deals falling within the clean technology category.
Big rounds were certainly in evidence during the second quarter, with four companies raising rounds of $100 million or more. They include: Fisker Automotive ($147 million), which makes electric vehicles, Harvest Power ($112 million), which provides organic waste management services, Bloom Energy ($100 million), which develops fuel cell technology, and Pinterest ($100 million), which operates a photo-sharing website.
However, early stage deals also saw a pickup. The number of early stage deals reached the highest quarterly total since Q1 2001, with $2.1 billion going into 410 deals, an 18 percent increase in dollars and a 28 percent increase in deals from the prior quarter. As more venture dollars are consolidated in the hands of a smaller number of firms, NVCA President Mark Heesen said the early stage uptick looks like a promising trends, and that he hopes it “signals an ongoing commitment on behalf of venture firms to make these longer term, breakthrough investments.”
Overall, venture investment was down some year-over-year. VCs invested $13.1 billion in the first half of the year, down from $14.7 billion in the same period last year.