Venture Capital Funding Hits 2001 Level, Internet Funding Down

The MoneyTree report on Venture Capital issued today shows a relatively robust funding environment for many seed and early stage companies, with the Internet being a surprising exception. According to the report venture capital investing volume in Q2 2007 is at its highest level since 2001. The growth is driven by investments in early stage or seed companies across multiple industries.

The sectors showing the most growth were software, life sciences, and clean tech. Despite talk of a web 2.0 bubble, the number of deals and the size of deals done dropped for Internet companies.

In total venture capitalists invested $7.1 billion in 977 deals in the second quarter of 2007.

"Based upon what we've seen in the first half of 2007, we may be looking at a new 6-year high in VC investments, "said Tracy Lefteroff, global managing partner of the Venture Capital practice at PricewaterhouseCoopers. "Venture capitalists have found no shortage of promising companies in which to invest, as indicated by the sharp uptick in the number of deals during the second quarter. Innovation is alive and well, and VCs are making sure these companies are provided with the opportunity to become the Fortune 500 powerhouses of tomorrow."

In terms of segments that did well, these include:

• Software has its strongest quarter since 2001 with $1.5 billion invested in 248 deals.
• Life Sciences had a good quarter with $2.2 billion going into 223 deals. The number of deals was an all-time high.
• Clean Tech saw $451 million going into 44 deals, representing a 38% increase in the number of deals and a 46% increase in dollars.
• Internet deals captured $897 million on 160 deals, down significantly from the first quarter when $1.4 billion went into 177 deals.
• Media and entertainment continued to decline with $482 million going into 73 companies.

First time investors also fared well, and the number of companies receiving funding as well as the dollar amount was the highest amount since 2001.