By Donald Zuhn --
Last week, the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, released the results of its MoneyTree Report on venture funding for the second quarter of 2010. The NVCA quarterly study, which the NVCA conducts with PriceWaterhouseCoopers using data from Thomson Reuters, indicates that venture capitalists invested $6.5 billion in 906 deals during the second quarter, a 34% increase in dollars and 22% increase in deals as compared to the first quarter of 2010. After adjusting its first quarter numbers, the NVCA determined that $4.9 billion had been invested in 740 deals, as opposed to its initial determination that $4.7 billion had been invested in 681 deals (see "NVCA Report Shows First Quarter Drop in Venture Funding"). In addition, the NVCA report indicates that the $11.4 billion was invested over the first half of 2010, a 49% increase in dollars over the $7.7 billion that was invested over the first half of 2009.
In contrast with the first quarter of 2010, when the Life Sciences sector (biotechnology and medical devices) led all sectors with $1.3 billion invested in 160 deals, but still suffered through a 26% drop in dollars and a 21% decrease in deals as compared with the fourth quarter of 2009, the news was all good for the industry in the second quarter. Thus, not only did the Life Sciences sector experience increases of 52% in dollars and 36% in deals ($2.1 billion invested in 234 deals), but the sector ran its string of consecutive quarters as the top sector in terms of dollars invested to five. Interestingly, the biotech industry received as much funding in the second quarter ($1.3 billion going into 139 deals) as the Life Sciences sector received as a whole in the first quarter. The biotech numbers constituted a 59% increase in dollars and 34% in deal volume as compared with the first quarter.
Of the seventeen sectors analyzed for the report, the NVCA noted that eleven experienced dollar increases in the second quarter, including the Life Sciences, Computers and Peripherals (48% increase), Consumer Products and Services (44%), and IT Services (28%) sectors.
In a press release issued by the NVCA and PricewaterhouseCoopers, Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, noted that the first quarter numbers had venture capitalists feeling more positive about the economic outlook for investment. She also noted that quarterly investment had topped the $6 billion mark for the first time since the third quarter of 2008. According to Ms. Lefteroff, the likely driver for the strong rebound in investment was the rise in Life Sciences companies looking to go public in the second quarter. She added that "[i]f the markets remain positive, we'll likely continue to see robust investment levels for the remainder of the year, with VC funding in 2010 poised to surpass 2009 levels."