Q1 2010 Sees Venture Capitalists Invest $5.9B in 731 Companies.

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Our entire 32 page, downloadable venture capital activity report is embedded at the end of this post.  To access the complete list of companies receiving venture capital funding in Q1 ‘10, login to CB Insights.

It has been suggested that the secret to happiness is low expectations.  And if Q1 ‘09’s multi-year low for venture capital activity sufficiently lowered everyone’s expectations then Q1 ‘10’s performance should have everyone at least a bit happier.

Q1 ‘10 saw $5.9B invested across 731 deals, and the quarter’s performance was a marked increase over the year ago quarter which saw $3.9B invested across 483 deals.  As we talked about in our Q4 ’09 report, the psychology and sentiment of entrepreneurs and venture capital investors continues to improve, albeit cautiously.  While $5.9B remains far below quarterly levels seen before the ’08-’09 recession, there is some belief that the VC asset class has perhaps reset at a lower but ultimately more sustainable and healthier level.

On a sequential basis, the news was generally good.  There was strong  growth in the number of deals as they grew from 687 to 731. On a dollars invested basis, the quarter was up versus Q4 ‘09 primarily on the back of some large Green deals which, given the large checks they garner, can always move the aggregate numbers significantly.

Q1 2010 Highlights

Lets Make a Deal (A Small One): 731 deals represents the highest deal activity in the last 6 quarters.  8 venture-backed IPOs and signs of increasing M&A activity have investors feeling a bit better.  That said, the dollars invested per deal declined.

The Big Green Monster: Green investments grew significantly after their Q4 ‘09 retreat.  Green investments jumped 55% and 134% on a deals and dollars basis, respectively, vs. Q4 ‘09.  The big dollar jump is attributable to a handful of mega-investments but deal count especially in the Energy/Renewables arena grew appreciably as well.

VC Getting More Diverse: Beyond the big three (CA, MA, NY), nine states (TX, NJ, WA, PA, CO, FL, MD, MN, CT) had at least 10 venture deals in this quarter demonstrating atypical broad-based geographic strength.  Even with this broader strength, the big 3 still account for 69% and 61% of dollars and deals.  California represented 49% and 41% of the venture dollars and deals in the quarter.

Are NY and Mass Gaining on Cali? Massachusetts’ share of venture dollars has steadily increased over the last four quarters.  NY’s share of deals has remained range-bound but the state jumped to 8% of deals in the  most recent quarter.  Cali has slipped on a deals and dollars basis the last two quarters.

Early Stage Investments Get Smaller: For the last three quarters, we’d noted that early stage investment remained hot with deals and dollars growing, but Q1 ’10 saw things cool a bit.   The number of early-stage deals remained largely consistent dropping only 4% vs. the prior quarter but dollars invested in early stage deals fell nearly 21%.  This trend of smaller deals was visible across all stages of investment.

New Jersey Shores Up Its Top Five Rank: For the second quarter in a row, NJ stayed in the top five on venture dollars received on the back of solid Healthcare investment.

Washington Gets Active on Deal Front – Washington’s deal activity saw the third straight quarter of increases slotting it fifth on a number-of-deals basis.  The state’s primary investments are in the Internet sector so dollars remain relatively smaller.

Invest In Your Health: Despite decline in dollars invested, Healthcare saw its number of deals increase.  For the 1^st quarter, Healthcare remained the largest single sector for venture money.

CB Insights – Q1 2010 Venture Capital Activity Report