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Venture Investment Falls, but Number of Deals Increase

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While the total number of dollars involved has dropped by 5%, there’s been a 2% increase in the number of deals by venture investors in U.S. companies in Q3 2010, compared with the same period last year. According to Dow Jones VentureSource, venture investors dropped $5.5 billion into a total of 662 deals. And even though the third quarter saw a drop in money, the first three quarters of 2010 saw a total of $18 billion put into 2,016 deals; that’s a 10% increase in both investment and deal activity over the same period last year.

The median size of deals during Q3 was $5 million, which is on par with Q3 2009. And during the first three quarters of 2010, both angel groups and venture capital firms funded 68 deals to the tune of $282 million, up from the same period last year. The first three quarters of 2009 saw only 59 such deals totaling $236 million.

Jessica Canning, global research director for Dow Jones VentureSource, said in a statement, "The uptick in venture investment through the first three quarters reflects the fact that the fund-raising and liquidity markets are also improving. With more cash on hand and with exits freeing up capital slated for their portfolio companies, deal making is picking up."

Investors are moving toward business technologies even as they leave the customer services industry; the former went from 121 deals at $841 million during the quarter, up from 103 deals at $708 million in the same period last year. The latter dropped 20% from last year; health care investment was also down, with capital dropping by 11%.