Venture Investors Pull Back in Q4

Venture investors pulled back during the fourth quarter, with dollars going to startups falling 9% and seed investors becoming more cautious.

The quarter saw renewed interest in health care investing and a dip in funding for Internet startups, according to a report from CB Insights. New York and Massachusetts gained ground on California in terms of dollars spent and deals completed, but they still trail the Golden State as the nation’s center of venture activity.

The quarter was the second in a row to see declining spending, the report found. Investors put $6.8 billion to work, compared with $7.5 billion in the third quarter and $8.1 billion in the second. Total deals during the period were 834, down from 835 in the third quarter.

Health care investing rose to a five-quarter high with $2 billion going to startups in the fourth quarter, up 27%. Internet investing slipped 7% and investments in mobile startups fell 43% from the third quarter.

Massachusetts edged out New York in terms of dollars invested in local companies, but California still accounted for 48% of capital spent, down from 53% in the third quarter.

For all of 2012, venture capitalists invested $28.3 billion, down 7.5% from 2011, the CB Insights study shows. Deal volume rose 7.1% to 3,267. The most active firm during the year was New Enterprise Associates, followed by Kleiner Perkins Caufield & Byers, Google Ventures, Andreessen Horowitz and First Round Capital.

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