3rd Quarter Venture Capital Activity

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Full report:

ß DowJones VentureSource (“VentureSource”) reported that the amount invested by venture capitalists in the U.S. in the third quarter of 2010 was approximately $5.5 billion in 662 deals, a decrease from the $7.7 billion invested in 740 deals in 2Q10. The PwC/NVCA MoneyTree™ report based on data from Thomson Reuters (the “MoneyTree™ Report”) also reported a decrease in 3Q10 venture capital investment, with $4.8 billion invested in 780 deals, compared to $6.9 billion being invested in 962 deals in 2Q10. Despite the decrease in 3Q10, investments by venture capital funds in 2010 is on pace to modestly surpass the amount invested in 2009, although 2009 was the weakest year for venture investment since 2003.

ß VentureSource reported 102 acquisitions of venture-backed companies in the U.S. in 3Q10, for a total of $5.7 billion, an increase from the $4.8 billion paid in 85 acquisitions reported for 2Q10.Thomson Reuters and the National Venture Capital Association reported 104 acquisitions of venture-backed companies in the third quarter of 2010, compared to 97 currently being reported for 2Q10. Acquisitions of venture-backed companies in the first three quarters of 2010 have almost already surpassed total acquisitions in all of 2009. The largest acquisition in 3Q10 was Walt Disney’s acquisition of Playdom for $563 million.

ß There were 14 venture-backed IPOs in the third quarter of 2010 raising a total of $1.2 billion, compared to 17 in 2Q10 raising a total of $1.3 billion, according to Thomson Reuters and the National Venture Capital Association. Although IPOs declined in the third quarter, there have already been significantly more IPOs in the first three quarters of 2010 (40) than in all of 2009 VentureSource reported nine venture-backed IPOs in 3Q10 raising a total of $723 million, compared to 15 IPOs raising $900 million in 2Q10. The largest IPO in 3Q10 was by Green Dot Corp. raising $164 million.

ß Fundraising by U.S. venture capital funds increased in the third quarter, with 45 firms raising $3 billion in the quarter, compared to 51 firms raising $2.1 billion in the second quarter of 2010, according to Thomson Reuters and the National Venture Capital Association. The largest fundraising in 3Q10 was $750 million by IVP. Both Thomson Reuters/NVCA and VentureSource report VC fundraising in 2010 to be behind the pace of 2009, which was the lowest year for fundraising in six years.

ß Since the first quarter of 2009, venture capitalists have invested significantly more in companies ($41.4 billion per VentureSource, $34.9 billion per the MoneyTree) than new capital that has been committed to venture funds ($22.7 billion per VentureSource, $25.4 billion per Thomson Reuters/NVCA), which is not sustainable over a prolonged period.

ß The Silicon Valley Venture Capital Confidence Index produced by Professor Mark Cannice at the University of San Francisco reported the confidence level of Silicon Valley venture capitalists at 3.7 on a 5 point scale, which was a significant increase from the previous quarter’s reading of 3.28.