Venture Cap Investment Deals on the Rise

(January 24, 2011) — According to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association (NVCA), venture capital firms invested $21.8 billion in 3,277 deals in 2010, representing an increase of 19% from 2009.

“The venture capital community found itself in a better position at the end of 2010,” said Mark Heesen, president of the NVCA, in a release. “We were clearly in recovery mode with investment levels reflecting the economic reality of our business,” he said, adding that additional investment across sectors highlighted those areas where the greatest opportunities lie, particularly within the Internet, software and clean technology industries. “The year’s increase in first time deals and early stage investment is encouraging as this trend suggests that the venture community is doing more with less. We hope this continues in 2011.”

The rise in venture investments in 2010 represented the first time the annual investment level has increased since 2007, according to the report.

The findings contrast slightly with an earlier report from last year by Cambridge Associates and the NVCA that showed venture capital 10-year returns — considered the most important measurement of the industry — were negative 3.7% for the period ending March 31, 2010. The report showed that despite slight improvement in initial public offerings and mergers and acquisitions, the venture capital industry is still shaky, which could cause difficulties for venture firms seeking to raise more capital in 2011 or 2012.

Peter Mooradian of Cambridge Associates, however, had said he believes the 10-year returns may have bottomed out, indicating his faith in bright news ahead.

“We continue to see a decline in the 10-year return number but believe it will bottom-out in the mid-negative single digits over the next two quarters,” Mooradian said in a release. “Sustained improvement in the exit markets should result in the figure returning to break-even or modestly positive territory in the second half of 2011.”