Where Is The Money Venture Capital Investments First Quarter 2011

Article by David Webb

Venture capital investments in the U.S. during the first quarter were up 5 percent from the final quarter of 2010 in terms of dollars, but down 11 percent in the number of deals, according to the National Venture Capital Association.

Its quarterly MoneyTree Report, put out with partner PricewaterhouseCoopers LLP, says there were 736 deals last quarter worth .9 billion, compared to 827 deals worth .6 billion in the previous quarter. It was the lowest deal count since the third quarter of 2009.

“Our focus is solely on large rounds north of million. We are only looking for late stage companies with size and a completed business plan,” commented Edwin Steinberger of Global Strategies Advisors based in Cambridge, Massachusetts. Steinberger was previously a serial entrepreneur having founded six companies that had liquidity events for their investors.

The average size of a venture capital investment hit at least million for the first time since early 2007, with 14 companies getting investments of million or more and four of those deals topped 0 million.

Mutual-fund company T. Rowe Price just disclosed investments in a number of high-profile, private Web companies, including Facebook.These aren’t the firm’s first investments in this area — it previously invested in Twitter in 2009. But, like Goldman’s investment in Facebook earlier this year, this news is another sign of the rapidly-growing interest from traditional financial institutions in Web startups.T. Rowe Price has invested 0.5 million in Facebook, nearly .8 million in social gaming giant Zynga, and .8 million in group-buying site Groupon, according to filings released today and spotted by The Wall Street Journal and The New York Times. The Zynga and Groupon investments had already been reported, but they weren’t confirmed by either company.

There is also new emphasis on early stage investments. Several seed stage funds have sprung up as well as the rise of the “superangel”. The hope is that one of them will become the next Groupon. Early stage venture investors tend to look for bold, swing for the fences investments rather than more mature, seasoned companies. Superangels also act as a mentor to young entrepreneurs striving to rise above the numerous companies seeking to be the next blockbuster investment.

Peter Klamka, an early stage investor added, “This is a great time for seed stage investing. Creative, talent, and brilliant people are bringing great products to various investors. Exit strategies tend to be acqusitions but there are other liquidity strategies as well.”

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