Monday, January 22, 2007

811 deals and $9.05 billion invested - The San Francisco Bay area remained the predominant market for venture capital investing

Silicon Valley / San Jose Business Journal - January 22, 2007

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U.S. venture capital investing reaches $25.75B in 2006
Silicon Valley / San Jose Business Journal - 9:01 AM PST Monday

Venture capital investment into U.S.-based companies continued its ascent in 2006 with the most annual deal flow and capital investment since 2001, according to a report released Monday.

The Quarterly Venture Capital Report released by Ernst & Young LLP and Dow Jones VentureOne reported a total deal count of 2,454 deals for the year, slightly ahead of 2005's level.

Capital investment reached $25.75 billion, an 8 percent increase over the preceding year.

While 2006 activity is at a five-year high point, the fourth quarter of 2006 was the slowest quarter of the year with 561 deals and $5.82 billion invested, declines of 13 percent and 2 percent from the fourth quarter of 2005, the report said.

Overall, the median round size in 2006 was $7 million, up from $6.5 million in 2005, and the highest annual median since 2000. For the second year in a row, investors also are focusing more than a third of activity on early-stage financings. Seed- and first-round deals made up 36 percent of the deal flow in 2006; about the same concentration of deal flow went to later-stage deals.

By industry, deal flow and capital investment into health care companies showed the most significant increases in 2006. Health care deal flow was up 5 percent over 2005 to 628 deals and capital investment for the industry was up 12 percent to $8.25 billion. Within the health care industry, the medical devices and equipment segment was particularly strong with 239 deals and $2.63 billion invested, which is 20 more deals than in 2005 and the most capital invested in this segment on record. The median size of a health care deal was $8 million in 2006, about the same as last year.

The information technology industry posted gains in key segments, although overall deal count was down by 21 deals from the previous year. But capital invested in IT overall increased 2 percent to $13.76 billion, the most money deployed in technology companies since 2001. Overall information services deal flow rose 35 percent to 321 financing rounds in 2006. Capital directed here was $2.41 billion, an increase of 27 percent from 2005.

The San Francisco Bay area remained the predominant market for venture capital investing, with 811 deals and $9.05 billion invested, steady deal flow with 2005 and a 7 percent increase in capital.

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