InterWest News
VC deals in 2nd quarter: $6.35 billion Big investors helped startups 856 times in a 3-month period
July 25, 2006
By Michael Liedtke, Associated Press
Increasingly optimistic venture capitalists invested $6.35 billion in startups during the second quarter — the biggest burst of deal-making in more than four years.
Venture capitalists spread the money across 856 deals — the most completed in any three-month period since the fourth quarter of 2001, when 978 financings closed, according to data compiled by the National Venture Capital Association, PricewaterhouseCoopers and Thomson Financial.
The report provides the latest sign of a venture-capital rejuvenation after years of malaise in the aftermath of the dot-com bust.
Besides boosting their commitments to unproven companies, venture capitalists raised $11.2 billion for their future investments during the second quarter — the biggest flurry of fund-raising in more than five years.
"We are finally in the recovery phase," said Gilbert Kliman, general partner for InterWest Partners in Menlo Park. "It's good to see a lot of people coming out and investing again."
Now the big question hanging over the venture capital industry is whether the recent rise in investing and fund-raising activity portends a repeat of the reckless behavior that fueled the dot-com mania of the late 1990s that culminated in the sobering letdown of a few years ago.
Most venture capitalists so far seem convinced that people in the industry are treading more carefully this time around.
"Common sense and prudence are the words of the day," said Steve Baloff, general partner with Advanced Technology Ventures in Palo Alto.
The hottest investment sectors during the second quarter included biotechnology, medical devices, computer software and the Internet.
Much of the money went to startups that hadn't previously raised any financing — a phenomenon that plants the seed for future investments.
First-time financings went to 282 companies that received a total of $1.3 billion during the second quarter. That was the venture capital industry's largest number of seed or early-stage financings in five years.
Most startups require several more rounds of venture capital investment over a five- to seven-year stretch before their businesses become successful enough to support an initial public offering of stock.
"We are encouraged by the upswing in the number of seed and early stage deals," said Mark Heeson, president of the National Venture Capital Association. "These companies represent the future of our industry."
