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Venture Investing Down in Q3, Up for Year-to-Date

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In the third quarter of 2010, venture capital (VC) investors put $5.5 billion into 662 deals for U.S.-based companies, down 5 percent in dollars invested but a 2 percent increase in deals from the same period last year, according to Dow Jones VentureSource. Science-based companies were among those experiencing a downturn in VC investments. For all of 2010 so far, however, the total amount invested ($18 billion) and number of deals (2,016) in all industries are both gains of about 10 percent over the first 9 months of 2009.

VC companies invested less in health care technologies in the third quarter 2010 compared to the same quarter in 2009. The $1.7 billion in 164 deals was a decrease of about 11 percent. Investments in biopharmaceutical companies dropped 7 percent to $854 million in 73 deals. Also, investments in medical device companies fell by 26 percent to $621 million in 59 deals.

The energy and utilities sector had mixed results in the third quarter of 2010, compared to 2009. While the number of deals increased slightly (from 19 to 21), the volume of investment dropped 28 percent to $359 million. The bulk of the activity went to renewable energy companies: 16 deals raised $221 million.

Information technology companies received the most investment support of any industry in the third quarter of 2010, attracting $1.8 billion in 232 deals, a 35 percent increase over 2009. Software firms alone accounted for $1 billion and 159 deals of that amount.

VC investors showed a little more interest in early-stage companies in the third quarter of 2010, compared to 2009. About one-third (34%) of the deals and one in five dollars (20%) went to seed- and first-round investments, compared to 31 percent of the deals and 15 percent of the money in 2009. Later-stage deals brought in more than half (57%) of the dollars, in 42 percent of the deals.

Related: Venture Funding Down for Science Startups in Q3 2010

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