VC investments in US cos drop by 5% in Q3 to $5.5-bn

Venture Capital investments in the American companies dropped by five per cent to $5.5 billion during the July-September quarter, taking the total to $18 billion for the year so far.

"Venture investors put $5.5 billion into 662 deals for US-based companies during the third quarter of 2010, a 5 per cent drop in investment," according to the data by Dow Jones VentureSource.

However, deal activity rose by 2 per cent from the same period last year.

Despite the investment drop during the most recent quarter, $18 billion was put into 2,016 deals during the first three quarters of 2010, which is a 10 per cent increase in both investment and deal activity over the same period last year.

"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 the capital slated for their portfolio companies, deal making is picking up," Dow Jones VentureSource Global Research Director Jessica Canning said.

The Information Technology industry has garnered the largest proportion of deals and money in the most recent quarter, while the capital poured in consumer service and healthcare sectors has declined.

In IT sector, 232 deals raised $1.8 billion, a 35 per cent jump in capital investment from the third quarter of 2009.

Apart from IT, business and financial services sectors witnessed a strong quarter, with 121 deals raising $841 million than 103 deals that raised $708 million during the same period last year.

The report noted that investment in consumer services industry, at 100 deals worth $560 million for the September quarter, was 20 per cent less than last year. Similarly, healthcare companies that garnered $1.7 billion for 164 deals during this quarter, witnessed a decline of 11 per cent drop from the same period last year.

However, the median deal size for the third quarter at $5 million, was at par with the same period last year.

Interestingly, 68 deals concluded in the first three quarters of this year and which raised $282 million, were funded by angel investors and venture capital firms.