VC funding either flat or falling

Major VC watchers release somewhat conflicting reports. However, neither one said venture capital funding is actually on the rise.

Update at 4:15 p.m.: Dow Jones figures have been added.

Venture capital funding in the U.S. is either flat or dropping, depending on whom you ask.

Major VC trackers came out with somewhat conflicting reports Saturday, though neither one said that VC funding is actually on the rise.

According to one report, from the National Venture Capital Association (NVCA) and PricewaterhouseCoopers (PwC), venture capital investments were virtually unchanged in the second quarter compared with the same period last year.

Venture capitalists invested $7.4 billion in 990 deals in the second quarter, their report said.

In contrast, a report from Dow Jones VentureSource stated that VC investments dropped 12 percent in the second quarter compared with the same period a year ago, with $6.64 billion put into 602 deals--the lowest quarterly deal count in three years.

Jessica Canning, director of global research for Dow Jones VentureSource, said in a statement that despite the drop, "we still saw steady deal activity and investment in the first half of the year, which is encouraging."

Start-up funding shrinks
According to the NVCA and PwC report, more venture firms found themselves funneling money to support later-stage companies at the expense of companies seeking first-time funding. The amount of money sunk into start-ups seeking first-round funds dropped by 12 percent to $1.6 billion in the second quarter. Meanwhile, later-stage deals grew by 14 percent to $3.1 billion because those companies in particular had fewer opportunities to go public. No venture-backed company went public in the second quarter.

The Dow Jones report did not offer comparable year-over-year figures, except noting that later-stage deals came to $3.48 billion, accounting for 54 percent of the second-quarter deals.

Bright spots
Both reports highlighted the bright spots for Internet and clean-tech companies.

The NVCA and PwC report said that venture firms invested $1.53 billion in Internet start-ups in the second quarter, up 49 percent from the comparable period a year ago. Clean-tech companies attracted $883.6 million in investments, a rise of 62 percent. Investments in software, however, dropped by 19 percent to $1.25 billion.

Dow Jones said that the overall tech sector was down, but that Web 2.0 companies saw gains.

The IT industry's deals slipped 27 percent to 286 in the second quarter, compared with 390 deals in same period last year. The new figure represents the lowest deal count since the first quarter of 1997, Dow Jones said.

Likewise, the amount of IT investment dropped 26 percent from nearly $3.5 billion to $2.6 billion. The new figure marks the lowest quarterly investment figure since 2003.

The information services sector, which includes most of the Web 2.0 companies, was the only section in tech with gains, according to Dow Jones. About $688 million was invested in 80 deals, a 20 percent jump over $572 million invested in 94 deals in the same period a year ago.

Solar shines
Another highlight in the Dow Jones report was the energy and utilities industry, which included a surge in renewable energy investments with $650 million put into 26 deals--records in terms in money and the number of deals.

In fact, the three biggest VC deals in the second quarter were related to solar energy, Dow Jones said. SunEdison of Beltsville, Md., raised $131 million--and an extra $30 million in separate debt financing. Meanwhile, eSolar of Pasadena, Calif., raised $130 million, and BrightSource Energy of Oakland, Calif., gathered $115 million.

According to the NVCA and PwC report, the number of acquisitions of VC-backed companies is shrinking. In the first six months of the year, buyouts of venture-funding start-ups fell by 28 percent from the same period last year.

"While IPOs and acquisitions may be rare now, VCs aren't concerned about that," Dow Jones' Canning said. "They're focusing on what's next--and that's reflected in the healthy early stage investment we're seeing in areas like renewable energy, information services and business support services."

CNET News' Natalie Weinstein contributed to this report.

 

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