Bloomberg News

U.S. Quarterly Venture Investment Rises 29%, Dow Jones Says

October 21, 2011

(Updates with research director in the third paragraph.)

Oct. 21 (Bloomberg) -- U.S. venture capital investments climbed 29 percent to $8.4 billion in the third quarter as funds raised by consumer Internet companies more than doubled from a year earlier, according to Dow Jones VentureSource.

The Internet ventures, including search, entertainment and social media, raised $1.3 billion, according to a statement today from the unit of New York-based News Corp. Almost half of all venture spending went to the newest companies.

The investments are “on pace to near pre-recession levels by the end of the year,” Jessica Canning, global research director for VentureSource, said in the statement.

An increase in deals, with 42 percent going to early stage companies, shows venture capitalists are optimistic they will be able to support future growth even as they struggle to raise money themselves, Canning said. Such investors raised $1.72 billion in the quarter, a drop of 53 percent from a year earlier, according to the National Venture Capital Association.

“It’s unclear how long venture capitalists can continue at this pace,” Canning said.

Competition for second rounds of financing will be intense, said Scott Austin, editor of Dow Jones VentureWire. For consumer Internet companies, 57 percent of deals were in the seed or first round, according to the statement.

Investment in companies that provide business and financial services rose 65 percent to $1.5 billion, VentureSource said.

Medical device companies raised $857 million, which was more than biopharmaceutical ventures for the first time since 1998. The biopharmaceutical total was $715 million.

The medical device investments were focused on later-stage companies, with larger deals, according to VentureSource.

--Editors: John Lear, Niamh Ring

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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