VC Investments up 29% in Q3 ($8.4B in 765 Deals)


DowJones VentureSource has released its third quarter venture capital financing statistics, which reports a 29% increase in investment and 8% increase in deals.

"Venture investment rose in the third quarter, putting the industry on pace to near pre-recession investment levels by the end of the year," said Jessica Canning, global research director for Dow Jones VentureSource. "While it’s unclear how long venture capitalists can continue at this pace given the weak fund-raising and difficult exit environments, the increase in deal activity, especially among early-stage start-ups, shows VCs are optimistic they will be able to support the next generation of start-ups."

Trends in national data show that medical devices raised more than biopharmaceuticals for first time since 1998. Medical devices raised $856M while biopharmaceuticals raised $715M.

Consumer Web companies also had a strong quarter -- raised $1.3B -- and is on track to exceed the $4.2B that companies raised in 2010. Already, the industry has raised $3.8B. Some of the biggest deals included Twitter -- raised $400M in Series G funding led by DST Global -- and AirBnB -- raised $112M in Series B funding led by Andreessen Horowitz.

"VCs are actively funding new Consumer Internet companies and pouring significant amounts of capital into later-stage deals, but second rounds are lagging," said Scott Austin, editor of Dow Jones VentureWire. "If investors continue focusing on later-stage companies that would likely have exited years ago had market conditions been better, the hundreds of young Web start-ups that raised financing in the last two years will face intense competition for second rounds."

The computer software industry continues to remain strong, raising $1.29B in Q3.

Investment in enterprise companies was strong at $1.5B, with the strongest investment in business support services ($1.2B), "which is driven by interest in marketing, advertising and data management companies."

In the energy and utilities industry, 33 deals raised $634M. Renewable energy companies claimed the majority of the industry’s investments with 30 deals that raised $621M.

Trends show that early-stage deal activity is up -- seed and first round funding accounted for 42% of deals in the third quarter -- from the period a year ago when early-stage rounds claimed 36% of deals.