Software remains the venture darling
For the first three quarters of 2011, venture capitalists invested $21.2 billion into 2,725 deals, representing 20 percent more dollars and three percent more deals as the first three quarters of 2010. The Life Sciences (biotechnology and medical device industries combined) and Clean Technology sectors saw marked decreases in both dollars and number of deals while the Software sector enjoyed its strongest quarter in almost 10 years.
Venture capitalists invested $6.95 billion in 876 deals in the third quarter of 2011, according to the MoneyTreeTM Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Quarterly venture capital (VC) investment activity fell 12 percent in terms of dollars and 14 percent in the number of deals compared to the second quarter of 2011 when $7.9 billion was invested in 1,015 deals.
The Software industry received the highest level of funding for all industries with $2.0 billion invested during the third quarter of 2011. This level of investment represents a 23 percent increase in dollars, compared to the $1.6 billion invested in the second quarter, and the highest quarterly investment in the sector since the fourth quarter of 2001. The Software industry also had the most deals completed in Q3 with 263 rounds, which represents a one percent decrease from the 267 rounds completed in the second quarter of 2011.
Investment in Internet-specific companies fell in the third quarter to $1.6 billion going into 231 deals. This level of investment represents a 33 percent decrease in dollars and a 21 percent decrease in deals from the second quarter when $2.4 billion went into 292 deals, a ten-year high. Internet-specific is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.