VC investments rose at least 11% in 2010

SAN JOSE, Calif. – Venture capital investments grew in double-digit figures in 2010, the first rise since 2007. Software and clean tech sectors picked up much of the growth in a year that overall was still well below 2006 investment levels.

VCs invested $26.2 billion in 2,799 deals in 2010 up 11 percent in money and six percent in number of deals over 2009, according to data Dow Jones VentureSource released Monday.

Figures provided by rival Thomson Reuters differed slightly. It said VCs spent $21.8 billion in 3,277 deals in 2010, an increase of 19 percent in dollars and 12 percent in deals, based on a report released Friday from the National Venture Capital Association (NVCA) and PricewaterhouseCoopers LLP.

Investment is still depressed from levels above $30 billion a year from 2006-2008. The software and clean tech sectors saw significant increases in 2010, while health care spending was down, both sources said.

“The health care and IT industries accounted for more than half of venture investment in 2010 but are not currently driving the growth,” said Jessica Canning, global research director at VentureSource.

"We were clearly in recovery mode [in 2010]," said Mark Heesen, president of the NVCA, citing increased investment "particularly within the Internet, software and clean technology industries."

Consumer services saw the largest rise in VC investments, followed by the energy sector and business services, Canning said. The NVCA report cited double-digit increases in nearly every sector except life sciences and networking. It said the greatest growth was in telecom (77 percent) and IT services (44 percent).

Software was the only IT sector to see an increase in both deal activity and capital invested as 608 deals raised $3.8 billion, VentureSource said. The networking sector was the hardest hit, dropping 27 percent in deals and 21 percent in capital invested from the previous year, it added.

NVCA said software investments were up 20 percent over 2009 to $4.0 billion. Software investing also increased in the fourth quarter of 2010 to the highest quarterly dollar level since Q3 2007 at $1.1 billion and was the only industry sector to receive more than $1 billion in the fourth quarter, it added.

The energy and utilities field was up 19 percent to $2.5 billion in 2010, driven by the renewable sector which raised $2 billion in 94 deals, said VentureSource. The related clean tech sector fared even better according to figures reported by the NVCA. It said clean tech saw a 76 percent increase in investments to $3.7 billion, but was still below the 2008 level of $4 billion.

The health care field overall was down, reaping seven percent less in investments at $7.4 billion, said VentureSource. The medical device slice of that pie fell nine percent to $2.3 billion and was flat in terms of deals at 324 in 2010, said the NVCA. The life sciences sector accounted for 28 percent of all venture capital dollars invested in 2010 compared to 33 percent in 2009, it added.

Despite double-digit gains in 2010, VCs spent less than in 2006-2008