Venture capital investment going to start-ups in the U.S. stabilized in the second quarter at $3.7 billion, according to the latest MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association. This is about a but is 15 percent increase compared to the low point in the first quarter of 2009 (when it was $3.5 billion). However, VC investment is still only about half of what it was during the 2nd quarter of last year when it was at $7.2 billion. Average deal size was also up a little bit to $6 million, from $5.3 million last quarter.
Most of the new investment came from biotech and medical devices, which saw pretty big increases in funding during the quarter to $88 million and $628 million respectively. Clean tech isn’t doing very well compared to a year ago, with only $274 million invested during the second quarter ($911 million a year ago). Internet deals brought in only $524 million in the quarter, down from $593 million the quarter before and $1.7 billion a year ago.
I’m not so sure anyone should be looking at this new data as a real VC investment “rebound”, nor as a so called “green shoot” of the economy. This data only shows money invested by VC firms, but not new money raised. Much of the VC money being invested now was raised well before the crash in the end of 2008. Significant amounts of new money being raised by VC firms might be indicative of some real investor confidence, but I don’t see that happening, especially with the foreseeable tax increases coming. Mark Heesen, president of NVCA, has this to say about fundraising:
Until we see notable upticks in venture fundraising and exit activity — which drive investment levels — we won’t expect considerable increases in the number of deals completed each quarter.