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Monday, July 21, 2008

According to the report, the top three venture capital deals in the second quarter all belonged to solar energy companies.

U.S. Venture Capital Investment Drops 12% from 2007 Highs with $6.64 Billion Invested in 2Q08

Dow Jones VentureSource Reports Fewest Deals Since 2005, Investment at 18-Month Low; IT & Health Care See Sharp Drops; Bright Spots Include Info Services, Energy


SAN FRANCISCO and NEW YORK, July 19 2008-- In the secondquarter of 2008, quarterly venture capital investment in U.S. companiesslipped below the $7 billion mark for the first time in 18 months.

According to the Quarterly U.S. Venture Capital Report released today byDow Jones VentureSource (http://www.venturecapital.dowjones.com), investment fell12% in the second quarter compared to the same period last year with $6.64billion put into 602 deals, the lowest quarterly deal count since 2005. The$7.58 billion invested in second quarter of 2007 was the second-highestquarterly totals recorded since the end of the dot-com boom in 2001.


"While the U.S. investment total is down compared to last year'simpressive second quarter, we still saw steady deal activity and investmentin the first half of the year, which is encouraging," said Jessica Canning,Director of Global Research for Dow Jones VentureSource. "Venturecapitalists commonly take the long-view when it comes to investing. WhileIPOs and acquisitions may be rare now, VCs aren't concerned about that.They're focusing on what's next -- and that's reflected in the healthyearly stage investment we're seeing in areas like renewable energy,information services and business support services."

Both IT & Health Care Decline
According to the report, the information technology (IT) industry sawdeal flow drop 27% from 390 deals in the second quarter last year to 286 inthe most recent quarter -- the lowest deal count since the first quarter of1997. Similarly, investments were down 26% from nearly $3.50 billion to$2.60 billion, the lowest quarterly investment total since 2003. Theinformation services sector, which includes the majority of today's "Web2.0" companies, was the only area within IT to see positive gains with $688million invested in 80 deals, a 20% increase over the $572 million investedin 94 deals during the same period last year.

Health care companies also fared poorly in the second quarter with theindustry only seeing 149 deals completed and $1.98 billion invested. Thatis 22% less than the $2.53 billion that was invested in 181 health caredeals in the second quarter of 2007.

"The health care industry is the most concerning at the moment, asinvestment is down 31% compared to the first six months of last year anddeal flow is at its lowest level in three years," said Ms. Canning."Considering the amount of time and capital it takes VCs to build asuccessful life science company, there may be a hesitation to continueinvesting in these companies given our current IPO market conditions."

The data showed that the majority of the health care industry'sinvestment decline in the second quarter was contained in the medicaldevices sector, which saw just 60 deals completed and $798 millioninvested, a 25% drop-off from the $1.06 billion invested in 72 deals duringthe same time last year.

Energy & Utilities Shine as Focus Shifts to Cleantech
One bright spot highlighted by the data was the energy and utilities industry, which posted a record quarter with $817 million invested in 32deals, up 160% over the $314 million put into 23 deals in the secondquarter of 2007. Most notably, there was a big surge in renewable
energy investments as the sector saw $650 million put into 26 deals, records onboth accounts.


"The movement of venture dollars from the traditional areas ofinformation technology and health care toward burgeoning sectors likerenewable energy, power management, and agriculture -- or 'cleantechnology' areas -- proves that venture capitalists are making good ontheir promise to tap opportunities in the massive energy market," said Ms.Canning.
According to the report, the top three venture capital deals in the second quarter all belonged to solar energy companies. Taking the top spotwas SunEdison of Beltsville, Maryland, which raised $131 million (as wellas an additional $30 million in separate debt financing) in its secondround. eSolar of Pasadena, Calif., garnered $130 million and BrightSourceEnergy of Oakland raised $115 million.
Compared to the second quarter of 2007, the smaller business andfinancial services (up 6% to $771 million) and industrial goods andmaterials industries (up 14% to $150 million) both posted modest gainswhile the consumer goods industry saw investment drop 24% to $121 million.


Later, Larger Deals Dominate But Early Stage Investment Continues
The quarterly report also confirmed that later-stage deals continue toattract the lion's share of venture capital with $3.48 billion, or roughly54% of the quarter's investment total, put into 225 rounds. This pushed themedian deal size of a later-stage round to a record $12 million in thefirst six months of 2008.

Early stage deal-making did not take a back seat, however. In fact, thenumber of first rounds actually ticked up from 200 rounds completed in thefirst quarter of the year to 207 in the most recent quarter while thelater-stage deal count saw a corresponding dip.

"The most encouraging part of this quarter's report is that early stage investing is holding relatively steady thus far in 2008," added Ms.Canning. "It may be harder for entrepreneurial companies to raise venturecapital these days but it's by no means impossible. Continued early stagedeal flow is a good sign that the venture industry is prepared to weatherthe economic downturn and will continue to back the next wave of disruptivetechnologies."

According to the data, the median deal size of a first round was $5million in the first half of 2008, an annual figure that has remainedunchanged since 2004.

The overall median size of a venture capital deal in the U.S. --including all stages of development -- climbed to $7.5 million in the firsthalf of 2008, the highest total on record.

Regional Perspectives
California once again dominated the venture capital activity in thesecond quarter, representing 45% of the nation's deal flow with 273 dealscompleted and nearly 51% of the capital invested with $3.36 billion. Bymajor region, the report showed:

-- The San Francisco Bay Area saw a 9% decline in overall ventureinvestment with $2.17 billion invested in 193 deals as IT investment wasoff nearly 21%.
-- Despite seeing investment slip 2% to $868 million in 67 deals,Southern California remained the second most popular region for ventureinvestment, beating out New England, which saw investment drop nearly 23%to $714 million in 76 deals.
-- The New York Metro region attracted $350 million in 42 completeddeals, 16% less than the $415 million invested in the second quarter lastyear.
-- The Potomac region was one of the two major regions to see a capitalincrease as investment ticked up 11% to $268 million in 19 deals.
-- Investment in the Washington State climbed 4% to $275 millioninvested in 25 deals.
-- Capital investment in the Research Triangle region dropped 4% to$118 million with 10 deals closed in the quarter.
-- Texas saw investment drop 65% to a paltry $90 million invested in 13deals, the region's lowest quarterly investment total in at least sixyears.
For more information about Dow Jones VentureSource or to arrange apersonal demonstration, visit http://www.venturecapital.dowjones.com or call866-291-1800.
The investment figures included in this release are based on aggregatefindings of Dow Jones proprietary U.S. research and are contained inVentureSource. This data was collected by surveying professional venturecapital firms, through in-depth interviews with company CEOs and CFOs, andfrom secondary sources. These venture capital statistics are for equityinvestments into early stage, innovative companies and do not includecompanies receiving funding solely from corporate, individual, and/orgovernment investors. No statement herein is to be construed as arecommendation to buy or sell securities or to provide investment advice.



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SOURCE Dow Jones & Company

1 comment:

ipod battery said...

Its good to know that these ventures are promoting the uses of solar energy.k

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