Money Tree Report: Venture capitalists invested $7.5 billion in 966 deals in the second quarter of 2011.

Complete report

Venture capitalists invested $7.5 billion in 966 deals in the second quarter of 2011. Quarterly investment activity increased 19 percent in terms of both dollars and the number of deals compared to the first quarter of 2011 when $6.3 billion was invested in 814 deals. The quarterly investment level represents the highest total in a single quarter since the second quarter of 2008. The deal count for the first half of 2011 (1,780 deals) is nearly identical to that seen in the first half of 2010 (1,784 deals) while the $13.8 billion invested in the first half of 2011 represented a 12 percent increase over the $12.3 billion invested in the first half of 2010.

The Life Sciences sector (biotechnology and medical device industries combined) saw an increase in venture capital dollars invested during the second quarter, rising 37 percent in dollars and 12 percent in deal volume from the prior quarter to $2.1 billion going into 206 deals.

Investment in Internet-specific companies surged in the second quarter with $2.3 billion going into 275 companies. This level of investment represents a 72 percent increase in dollars and a 46 percent increase in deals from the first quarter when $1.4 billion went into 189 deals. The second quarter marks the most dollars going into Internet-specific companies in a decade, since the second quarter of 2001. Five of the top 10 deals this quarter, including the top two deals, were classified as Internet-specific investments, which is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.

Investments by industry Q2

The Software industry received the highest level of funding for all industries with $1.5 billion invested during the second quarter of 2011. This level of investment represents a 35 percent increase in dollars compared to the $1.1 billion invested in the first quarter. The Software industry also had the most deals completed in Q2 with 254 rounds, which represents a 25 percent increase from the 203 rounds completed in the first quarter.

In terms of dollars invested, the Biotechnology industry returned to second place, rising 46 percent from the prior quarter to $1.2 billion in the second quarter of 2011. The number of deals also rose in the second quarter, increasing 20 percent to 116 from 97 in the first quarter of 2011. The Medical Devices and Equipment industry also experienced an increase, rising 26 percent in Q2 to $841 million, while the number of deals remained relatively flat at 90 deals in Q2. This sector ranked third overall in Q2 in terms of dollars invested.

The Clean Technology sector, which crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation, saw a 23 percent decrease in dollars to $942 million in Q2 from the first quarter when $1.2 billion was invested. The number of deals completed in the second quarter, however increased 11 percent to 81 deals compared with 73 deals in the first quarter, marking the most active quarter for Clean Technology deals completed in MoneyTree history.

Ten of the 17 MoneyTree sectors experienced double-digit increases in dollars in the second quarter, including IT Services (19 percent increase), Media & Entertainment (27 percent), Consumer Products & Services (248 percent), and Semiconductors (22 percent increase).