The entire 50+ page Q2 2010 Venture Capital Activity report is embedded below.  For the latest private company data, sign up for the free CB Insights newsletter or follow us @cbinsights on Twitter.

At $5.9B of venture capital funding over 612 deals, Q2 2010 gives credence to the idea that venture funding may be settling into a “new normal”.  A tepid climate for venture capital fundraising has pundits (and even some investors) commenting that $20 to $25B may ultimately a more sustainable level for the VC industry.  The trailing four quarters of CB Insights data comes in at about $23.4B suggesting these prognostications may be right.

The following are the highlights of Q2 2010′s venture capital activity along with the VC deal and funding trend over time.

q2 2010 venture capital funding and deal trend

The company, investor and deal data that make up our Q2 2010 Venture Capital activity report are all available on CB Insights.

Is Venture Capital Primarily a 3 State Game?

Based on just this quarter’s data, it looks like that.  California, Massachusetts and New York represented 65% of the quarter’s deals and 70% of funding.  Both figures represent the highest concentrations going to the three states in the last five quarters.

Early Stage Ups Share of Deals / Declines on Dollars

Early stage deals represent almost 42% of VC deals in the quarter and only 18% of funding.  The trend towards more small deals continues.

VC Seed Investments are the New Series A

The greater number of small deals was most clearly visible with the increase in the number of deals deemed Seed VC deals.  With large existing funds and new smaller funds emerging to make bets on earlier-stage companies, Seed VC rounds continued their strength.

Traffic to Internet Deals Bustling

Internet deals and dollars were at the highest levels seen in last five quarters. Industries within internet sector receiving investment  were quite diverse ranging from games to social to ecommerce showing opportunities.  Ecommerce on track to eclipse levels seen in 1999.

An Uncertain Diagnosis for Healthcare

Deal count flat vs. year ago but funding down 17%.  California increases its share of healthcare dollars on back of later-stage deals.  Medical devices which have been steadily increasing since 2004 vs. other healthcare categories such as  biotechnology and pharmaceuticals continued to extend their lead.

Clean Tech Continues Its Wild Ride

Of all sectors, green tech sees the largest fluctuations in venture funding (usually based on the presence or lack of a few large deals).  This quarter was no different with funding dipping 20% vs. Q1’10.  Deal count also sank 35%.  Solar and bio-energy saw the most green.

California Takes Over 50% of Total Venture Dollars

The Golden State breaks the $3B funding mark with over half of that for Healthcare and Internet companies.  Cali early-stage jumped 35% vs. the prior quarter.

Mass’ Share of National Venture Deals & Dollars Up

Over the last five quarters, Massachusetts’ companies have increased their share of venture dollars and deals.  Healthcare remains the state’s cornerstone with internet and mobile also up.  Early stage was also healthy representing 25% of total  funding.

New York:  Internet or Bust

Unlike Cali and Mass which have some diversity amongst sectors of VC investment, NY is mostly about the internet.  Over 70% of deals and dollars went to internet companies representing a 25% increase in deals over Q1’10.

Washington Climbing Back

Funding climbs 53% vs. prior quarter but still down 23% vs. year ago.  Deal count hold steady in recent range.  Healthcare dominates funding and deal count.

Texas Sees More Green While Going Green

Texas funding grew by 58% vs. last year and nearly doubled deal count.  Nearly 50% of funding in the state went to green/clean tech focused on renewable technologies.

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Q2 2010 Venture Capital Activity Report – CB Insights (