VCs Boost Global Investment

Venture capitalists put more money to work around the globe in the second quarter, in a rebound from last year’s slump, and the vast majority of that money is still going to U.S. companies.

Dow Jones VentureSource reports this morning VCs invested more than $10.3 billion in 1,160 deals throughout the world during the second quarter, a 14 percent spike over last year’s $8 billion invested in 1,022 deals. And while there’s plenty of talk, and a lot of money, going into the notion of international investment, U.S. companies attracted the lion’s share of deals.

“Fueled by investors’ need to keep current portfolio companies funded and to begin investing from new funds, venture capital financing had a strong quarter,” said Jessica Canning, global research director for Dow Jones VentureSource, in a release. “Deal activity and capital invested in venture-backed companies is once again near levels seen before the start of the economic recession in 2008.”

VCs poured $7.7 billion into U.S. companies in 744 deals during this year’s second quarter, the most since they invested $8.4 billion in 699 deals in the third quarter of 2008, before the full effects of the Wall Street meltdown became apparent. Europe attracted the second-largest amount of venture funding, $1.4 billion into 289 deals, a 40 percent jump over last year.

China and India are certainly attracting a huge amount of attention from venture capitalists. But the raw dollar amounts invested still pale in comparison to the amount VCs put into U.S. firms, perhaps not that surprising when you consider that venture capital’s biggest centers are still concentrated in the Silicon Valley and around Boston.

Investment in China rose 52 percent to $689 million in 58 deals, while India drew $182 million in 23 deals. That’s less than much-smaller Israel, with its strongly established venture and startup culture, attracted; Israeli companies landed $220 million in 27 deals, a drop in the number of deals from last year, but a rise of 57 percent in the amount of capital raised.

Focusing on the U.S., still the world’s largest economy, and biggest attractor of investment, the number of deals increased 13 percent from last year’s 656 deals, and capital flowing into companies increased 26 percent from last year’s $6.1 billion.

U.S. healthcare companies attracted $2.7 billion for 201 deals, claiming the biggest share of dollars invested of any sector measured by Dow Jones VentureWire, and marking a 13 percent increase over last year’s $2.4 billion.

"Venture investment in healthcare companies has gained momentum over the last several years, a trend that is likely to continue. One catalyst for recent growth is venture firms placing a premium on drug development companies nearing commercialization, requiring large sums to get their drugs through Phase III trials,” said Scott Austin, editor of VentureWire, in a release.

IT deals numbered 231, with $1.9 billion flowing to the sector, an increase since last year’s $1.6 billion flowing into 189 deals. Energy and utilities drew $1.1 billion in 26 deals.