US venture capitalists invested $5.8bn in 750 companies in Q2, according to the MoneyTree Survey produced by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. This was an improvement on Q1 this year, which saw $4.9bn invested, but fell short of the comparable quarter in 2004 when $6.1bn was invested.
Later stage funding in Q2 reached a four year high at $2.4bn and investments in start-up and early stage companies increased to $1.3bn, this was boosted by a couple of large deals.
Mark Heesen, president of the National Venture Capital Association, said: “The strength of the early and late stage ends of the venture spectrum indicates where we are in the current investing lifecycle. Many venture capital firms are deploying the final portions of current funds into late stage rounds while those that have recently raised new funds are focusing more on earlier stage deals. We expect to see the scales tip towards early stage as we move through the next 18 months. We are encouraged to see investment levels remain within the RIPE zone of $4bn to $6bn as this continues to reflect a sustainable pace.”
First time financings were recorded at their highest level for two years with 218 companies receiving $1.4bn in Q2, which was roughly the same as for Q1. For the first half of 2005 first time financings accounted for 25% of dollar spend, the highest aggregate proportion since year 2000. In the first half of 2005, 427 companies raised their first round of institutional venture capital, which puts the year on a similar footing to 2004. The most first time deals were in the software and life sciences areas, with 63 companies and 42 companies, respectively.