By
Donald Zuhn –-

On
Friday, the National Venture Capital Association (NVCA), a trade association
representing the U.S. venture capital industry, released the results of its
latest MoneyTree Report on venture funding.  The study, conducted with PriceWaterhouseCoopers and Thomson
Reuters, indicates that venture capitalists invested $5.0 billion in 794 deals
in the fourth quarter of 2009, a 2% decrease in dollars and 15% increase in
deals as compared to the third quarter of 2009, when $5.1 billion went into 689
deals.  Interestingly, the NVCA had
indicated back in October that $4.8 billion had gone into 637 deals in the
third quarter (see "NVCA Study
Shows Increase in Third Quarter Venture Funding"),
numbers which would have placed the fourth quarter results in a more positive light.

Over the entire year, the NVCA report indicated that venture
capitalists invested $17.7 billion in 2,795 deals in 2009, which marked the
lowest level of funding in twelve years. 
The 2009 totals also represented a 37% decrease in dollars and a 30%
decrease in deals as compared with 2008 — the second consecutive year of declines
in deals and dollars invested.

While
the overall investing numbers were down slightly in the fourth quarter, biotech
investing saw a 10% increase in dollars in the fourth quarter, with $1.0
billion being invested in 108 deals. 
As a result, the biotech sector was the number one sector for dollars
invested in the fourth quarter and the only sector to receive more than $1
billion in the quarter.

The
biotech sector was also the top sector for the whole of 2009, drawing $3.5
billion in 406 deals for the year. 
Despite the top ranking, however, biotech investing declined by 19% in
both dollars and deals in 2009.  The
Life Sciences sector, which comprises the biotechnology and medical device
industries, accounted for 34% of all venture capital dollars invested in 2009 as
compared to 28% in 2008.

In
a press release announcing the release of the new MoneyTree Report, the NVCA pointed
to fourth quarter increases in the number of first-time and early stage deals
completed as "potentially marking the beginning of an uptick in investment
levels for 2010."  NVCA
president Mark Heesen predicted that "[n]ow that the economy has begun to
show signs of improvement, we expect to see dollars flow more freely back into
those sectors that offered the most promise before the recession began — clean
technology, life sciences and IT." 
Tracy Lefteroff, the global managing partner of the venture capital practice
at PricewaterhouseCoopers, noted that "[d]espite the overall drop in funding
in 2009, VCs placed more bets in the fourth quarter of 2009 than we've seen all
year," adding that venture capitalists were "investing fewer dollars
in these companies but the fact remains that there are still entrepreneurs out
there with great ideas who are getting the opportunity to take the next step
forward with their businesses."

Additional
information regarding the latest report can be found here.

For
additional information on this and other related topics, please see:
•
"Biotech/Pharma Companies Look to Market for Capital," December 29,
2009
•
"NVCA Study Shows Increase in Third Quarter Venture Funding," October
23, 2009
•
"Biotech/Pharma Financing Improving, R&D Spending Up," August 31,
2009
•
"Investors Saw Biotech Rebound Coming," August 17, 2009
•
"Is Biotech/Pharma Beginning to Bounce Back?" August 12, 2009
•
"First Quarter Venture Capital Funding at 12-Year Low," April 23,
2009
•
"NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech
Rebound in 2009," February 16, 2009