VC Funding Cut for U.S. Firms, Science Companies Take Hit

(Investor.gov)

Venture capital investments in U.S.-based companies are down for the second quarter of 2012, with software and Internet companies favored over enterprises based on scientific discoveries. According to Dow Jones VentureSource, a financial industry research service, companies in the U.S. raised $8.1 billion in 863 deals during the second quarter of 2012, a nine percent decline in capital and three percent decline in deals from the second quarter of 2011.

For the first half of 2012, venture capital (VC) investments totaled $15.3 billion in 1,595 deals, a seven percent drop in capital and five percent decline in deals from the first six months of 2011.

Biopharmaceutical and medical device companies suffered double-digit percentage investment declines compared to the second quarter of 2011. In the second quarter, biopharmaceuticals companies raised $570 million in 54 deals, a 43 percent decline in capital invested and 22 percent decline in deals. Medical device companies raised $653 million for 67 deals, a drop of 33 percent in investment and 22 percent decline in deals.

The only part of the health care sector gaining more VC attention in the second quarter was health care information technology (IT), which reflected a broader interest by venture investors in IT-based companies. Health care IT companies raised $268 million in 29 deals in the second quarter, a 33 percent increase in capital raised and 45 percent increase in deals.

Venture investors also cut their funding in energy-related companies during the second quarter of 2012. Energy companies raised $293 million in 25 deals, a 56 percent decline in capital and 32 percent decline in deals from the same period in 2011. Most of the activity — 18 of the 25 deals — involved renewable energy companies.

IT and Internet companies were the leading recipients of VC funding in the second quarter. IT companies raised $2.4 billion in 286 deals for the second quarter, down slightly from the same period last year when $2.5 billion was put into 296 deals. Software continued to gain most of the attention in the IT sector, generating 218 deals that raised $1.6 billion, a two percent decline in deals, but a two percent increase in capital from the second quarter of last year. Consumer Internet companies — social media, entertainment, and shopping aggregators — raised $967 million in 134 deals during the second quarter, a 27 percent increase in capital and 14 percent gain in deals from the second quarter of 2011.

Venture investors showed more interest in earlier stage investments during the second quarter of 2012. Early-stage deals captured nearly half (45%) of the deals and about a quarter (23%) of capital invested during the second quarter of 2012, up from the second quarter of last year. Second-round deals declined somewhat in both number and dollar volume compared to the second quarter of 2011, while later stage deals stayed about the same in number and investments dollars as last year.

Read more:

• Venture Investors Increase First Half 2012 Fund Raising
• U.S. Venture Deals, Dollars Decline in Q1 2012
• Venture Investment for European Companies Drops in 2011
• U.S. VC Investments Up for 2011, Flat for Science Companies

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