Venture capitalists invested $21.8bn in 3,277 US deals last year, according to accountants PricewaterhouseCoopers’ MoneyTree data and local trade body the National Venture Capital Association. This was a 19% increase in dollars invested and a 12% increase in deals done compared to 2009 figures and the first increases since 2007.
The software industry regained its status as the single largest investment sector for the year, rising 20% to $4bn last year compared with 2009, while the medical device industry fell 9% in dollars and was flat in terms of deals in 2010.
Clean technology saw $3.7bn invested in 267 deals, while internet-specific companies also saw an increase with $3.78bn going into 729 deals representing a 28% increase in dollars and 14% in deals from 2009.
Investments into seed stage companies decreased 2% in terms of dollars but increased 4% in terms of deals with $1.7bn going into 363 companies last year.
The dollar level and number of companies receiving venture capital for the first time jumped 29% both in terms of dollars and deals from the prior year, rising to $4.3bn going into 999 companies.
Thirty-five US-based funds raised nearly $3bn in the fourth quarter of 2010, according to Thomson Reuters and the NVCA. This level marks a 6% decrease, by dollar commitments, compared to the third quarter of 2010, which saw 49 funds raise $3.2bn during the period. For full year 2010, 157 venture capital funds raised $12.3bn, the fourth consecutive year of declines and the slowest annual period for venture capital fundraising since 2003.
This followed a slight change in performance. With the exception of the 10 and 15-year returns which declined slightly, venture capital performance improved across most time horizons as of the end of the third quarter of 2010, according to the Cambridge Associates US Venture Capital Index, the performance benchmark of the NVCA (click here for table).
Separately, secondaries firm Coller Capital’s survey of investors (limited partners, LPs) in venture capital and buyout funds found twice as many of the 120 respondents (34%) were intending to increase their target allocation to private equity as reduce it (16%), although this represented a continual fall in interest by some LPs.
Interest in VC was muted. While a third of LPs expected to achieve annual net returns of 16% or more across their private equity portfolios over the next three to five years, 64%Ps said only a small number of
VC firms worldwide would generate consistently strong returns over the next decade. One fifth (22%) of LPs said no VC firm would be able to deliver consistently strong returns.
A majority of European (57%) and Asia-Pacific (63%) investors see an early-stage VC funding shortfall in their region, while North America-based LPs are more optimistic, with 37% seeing a shortfall.