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Survey: Tech venture funding a mixed bag

Three of six tech sectors post a sequential increase in second-quarter venture investments, a new survey finds.

Three of six tech sectors posted a sequential increase in second-quarter venture investments, according to a survey released Tuesday.

The computers and peripherals sector posted a 35.4 percent increase in the second quarter over the previous quarter, to $169.9 million, the survey found. Telecommunications followed, with a 21.4-percent increase, or $615.2 million. Software, which represented nearly a quarter of all venture investments across all industries, posted a 6.7 percent increase in the second quarter, to $864.2 million.

The MoneyTree survey was issued by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.

The survey noted that venture capital investments in all industries increased to $4.28 billion in the second quarter, up from $4.04 billion the previous quarter. That marked the first sequential increase since 2000 and mirrored results released Monday by a competing venture capital report from VentureOne.

While both the telecommunications and the computers and peripherals sectors posted double-digit gains, most funding in these sectors was given to mature start-up companies, said Tracy Lefteroff, a global managing partner for venture capital practice at PricewaterhouseCoopers. Mature, or later-stage, companies tend to have raised more than two rounds of funding.

"I didn't see a bunch of brand-new companies funded, but rather it seemed the investments went to support existing companies," Lefteroff said.

A wider range of software start-up companies was funded, the survey found.

"It's indicative of VCs recovering from the Internet and software drop," he noted. "The recent mergers and acquisitions in the software arena is encouraging for VCs."

Venture capitalists, however, avoided putting more money into information technology services, networking, and equipment and semiconductor companies, the survey found.

Funding for IT services fell to $108.7 million in the second quarter, nearly a 50 percent drop from the previous quarter. Semiconductor investments declined to $268.3 million in the quarter, from $278 million the quarter before. And networking and equipment investments fell to $427.1 million in the quarter, down from $458.5 million.

While venture investing in all industries total increased in the second quarter, Lefteroff cautioned it is too early to tell if an economic rebound has begun.

"I think life sciences will lead us in a turnaround and tech will follow," Lefteroff said. "I don't think tech will be the last one out of a recovery,"