Early Stage Companies Raise Most Funds in a Decade

The second quarter of the year was a banner one for early-stage companies seeking venture capital funding, according to a report released today. But overall fundraising is down compared with the same time last year, and the biotech and clean-tech industries continue to struggle.  

The good news: More early-stage companies raised venture capital in the last quarter than since the beginning of 2001, during the last tech boom, the latest MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association (NVCA) shows. $2.1 billion went into 410 early-stage deals. Overall, $7 billion went into 898 deals. 

The companies that did the best were in the less capital-intensive software and Internet sector. The biotech industry, with $697 million going into 90 deals overall, hit its lowest quarterly total in nearly a decade. The number of clean technology deals dropped 28 percent from the previous quarter, to 55 deals. More than a third of the total money invested in cleantech companies went into $100 million-plus bets on later-stage funding rounds for Fisker Automotive, Harvest Power, and Bloom Energy—the largest three deals across all industries in the last few months. 

Many VC firms, especially smaller ones, have struggled throughout the economic downturn, which has made them more risk-averse. “The concentration of venture capital dollars in the hands of fewer firms will increasingly dictate the flow of investment,” said Mark Heesen, president of the NVCA, in a press release. Right now, that means continued capital for IT companies, in particular, he noted. Higher-risk investments in life sciences and clean-tech are still difficult for VCs to touch.