VC investing declines in Q3, but biotech sees bump

Venture capital investments declined sharply in the third quarter of 2010, according to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters. Venture capitalists invested $4.8 billion in 780 deals in the third quarter of 2010; these numbers reflect a decline in quarterly investment activity of 31 percent in terms of dollars, as well as a decline of 19 percent in number of deals compared to the second quarter of 2010 when $6.9 billion was invested in 962 deals.

The biotechnology industry received the second highest level of funding for all industries in the quarter with $944 million going into 108 deals, NVCA says in a release. This level of investment represents a 32 percent decrease in dollars and a 29 percent decrease in deals compared with the second quarter when $1.4 billion went into 152 deals. Medical devices and equipment saw a 27 percent decline in dollars and an 18 percent decline in deal volume in the third quarter with $573 million going into 82 deals. This sector ranked third overall for the quarter.

Three medical biotech companies were included in the list of top U.S. venture capital investments during the quarter: Santa Clara, CA-based Relypsa ($70 million), Irving, Texas-based Reata Pharmaceuticals ($59.1 million) and Menlo Park, CA-based Pacific Biosciences ($59 million). Santa Rosa, CA-based Trivascular, a medical device company, also made the list with $60 million. 

"While overall funding in traditionally strong sectors like Life Sciences and popular Clean Technology were down, Biotechnology continued to bring in significant funding while Software took the lead as the top generator of VC dollars in Q3," says Tracy Lefteroff, global managing partner of the venture capital practice at PwC. "Compared to the third quarter of 2009, investing remained relatively flat; however, despite declines for the quarter, funding remains on course to pass investment levels of 2009."

Nine companies in the Pittsburgh area received capital infusions during the three months ended Sept. 30 as in 2009, but dollars were higher, $50.5 million versus $36 million. The region's largest deal was a $17 million capital raise by Avere Systems, followed by a $15 million capital raise by ALung Technologies, according to the Pittsburgh Business Times.

Over in the Pacific Northwest, Washington was fifth in the nation in amount invested at $171 million with 29 deals, falling behind Texas, New York, California and Massachusetts. The state has recently ranked higher, according to Stephen Sommerville, partner at PwC in Seattle. "The results were a little disappointing," Sommerville says, as quoted by the Seattle Times. "You have to wonder if the recovery of Washington state as it relates to VCs is losing a little bit of steam," he adds.

And in New England,  $539.5 million was invested during the three months ended Sept. 30, a nearly 25 percent decline from the previous quarter, the Boston Globe notes.

- see the NVCA/PwC release
- check out the NVCA website to get more charts
- get more from the Pittsburgh Business Times
read the Seattle Times' report
- check out the Boston Globe story