Venture-cap investments rise in 1Q

April 15, 2011 By RACHEL METZ , AP Technology Writer

(AP) -- Funding to U.S. startups climbed during the first three months of the year, with venture capitalists putting more money into fewer companies, according to a study scheduled to be released Friday. Despite the decline in deals, the growth may indicate an improvement in the health of the venture investment market.

For the January-March period, investments rose 14 percent to $5.9 billion, compared with $5.2 billion invested during the same quarter in 2010, according to the study. In all, 736 startups received funding, which is down nearly 7 percent year over year and marks the smallest amount of companies to be funded since the third quarter of 2009.

The study is conducted each quarter by the National Venture Capital Association and PricewaterhouseCoopers, and is based on data from Thomson Reuters. This quarter, the NVCA said two changes were made to the way data are collected in an attempt to more accurately reflect market trends: The study now includes financing rounds to startups that have previously received funds earmarked for an acquisition (though it won't count the funding round that enabled the acquisition). And it also includes corporate investments in startups that have received venture funding in the past.

As usual, most of the quarter's funding went to companies in the expansion and later stages of development. This was higher than in the same quarter in 2010: $4.0 billion was split among 407 expansion and later-stage companies in the of 2011, compared with $3.7 billion spread among 445 companies last year. Seed and early-stage startups received a total of $1.9 billion, which was divided among 329 companies; last year, $1.51 billion was divvied up to 342 early and seed-stage companies.

The environment for and initial public offerings for mature startups is still somewhat rough, meaning in many cases will likely have to wait quite some time before profiting from their investments.

The number of companies that snagged seed funding declined nearly 36 percent to 56 in the quarter, and the amount of funding for this stage sank nearly 72 percent to $120.5 million. However, the study also indicated that 273 early-stage startups received a total of $1.7 billion in funding - compared with the 255 startups that received $1.1 billion in funding last year.

During a conference call to discuss the results with media, Philip Bronner, a general partner with Novak Biddle Venture Partners, said that the market for seed-stage investments is still "very active," but he believes a lot of companies are being financed by a rising tide of angel investments.

A total of $987.1 million went to companies getting their first round of venture funding, compared with $1.1 billion last year. This money went to 221 companies, down seven companies from the year-ago quarter. Most of them were in the seed and early stages of development, which is consistent with past activity.

Software companies, regularly one of the most well-funded categories, received the most in the quarter - $1.1 billion - while industrial and energy startups took the No. 2 spot with $1.0 billion. Biotechnology startups were No. 3 with $784.2 million in funding.

Investments in clean-tech startups, which include alternative energy, recycling, conservation and power supply companies, rose 36 percent to $1.0 billion - a mark it only passed once in 2010. The sector has been mercurial lately: It fell throughout 2009, rose in all but the third quarter of 2010, and now appears to be climbing once again.

Also on the call, Ira Ehrenpreis, a general partner at Technology Partners, said this sector's growth was a "profound validation that clean tech is here to stay." He added that it shows corporations are focusing more on clean tech, both on making it part of their own practices and on investing in clean-tech startups.

The quarter's largest investment went to solar power plant company BrightSource Energy Inc., which received $201.7 million. The second-largest investment - $200 million - went to plastic display company Plastic Logic Ltd., while the third-largest investment - $111.9 million - went to electric vehicle maker Fisker Automotive Inc.

Explore further: Venture-cap investments decline 7 percent in 3Q

0 shares

Related Stories

Venture-cap investments decline 7 percent in 3Q

October 15, 2010

(AP) -- Venture capitalists poured less money into U.S. startups in the third quarter and split this among more companies, signaling that investors are trying to be more economical with their funds.

Venture-cap investments fall 7 percent in Q4

January 21, 2011

(AP) -- Funding to startups slipped in the fourth quarter of 2010 as venture capitalists funneled less money into fewer companies, with biotechnology taking the brunt of the drop-off, according to a study slated for release ...

Venture-cap investments climb 53 pct in 2Q

July 16, 2010

(AP) -- Venture capitalists funneled more money into U.S. startups in the second quarter, indicating continuing confidence that the economy is on the mend.

Venture-capital investments down 33 pct in 3Q

October 20, 2009

(AP) -- Venture capitalists' investments in U.S. startups rose in the third quarter when compared with the first two quarters of the year, suggesting increased confidence in the economy. When compared with the year-ago period, ...

Venture capital investments decline in 4th qtr

January 22, 2010

(AP) -- Venture capitalists invested less money in U.S. startups in the fourth quarter and showed signs of spreading out those fewer dollars among more companies, reflecting continued caution amid uncertainty about the economy.

VC investments plunge 51 pct to $3.7 billion in 2Q

July 21, 2009

(AP) -- Venture capitalists cut their U.S. investments in half during the spring, the second-consecutive quarter to mark a more than 50 percent decline, leaving the money flowing to startups at the slowest trickle in 12 ...

Recommended for you

US prepares to cede key role for internet

September 29, 2016

The US government is set to cut the final thread of its oversight of the internet, yielding a largely symbolic but nevertheless significant role over the online address system.

Android's Nougat update isn't flashy, but still pretty handy

September 28, 2016

Nougat, Google's latest update of its Android smartphone software, isn't particularly flashy; you might not even notice what's different about it at first. But it offers a number of practical time-saving features, plus a ...

Hyperloop pushes dream of low-cost futuristic transport

September 23, 2016

Is it a plane, is it a train? No, say supporters of Hyperloop, a futuristic mode of transport floated by Silicon Valley billionaire Elon Musk that promises high-tech, high-speed and cheap travel over long distances.

MIT's flea market specializes in rare, obscure electronics

September 25, 2016

Once a month in the summer, a small parking lot on the Massachusetts Institute of Technology's campus transforms into a high-tech flea market known for its outlandish offerings. Tables overflow with antique radio equipment, ...

First test of driverless minibus in Paris Saturday

September 24, 2016

The French capital's transport authority will on Saturday carry out its first test of a driverless minibus, in the hope that regular routes for the hi-tech vehicles will be up and running within two years.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.