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Year in Review: Top Venture Capital Industry Statistics in 2011

 
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With 2012 moving into full swing, many entrepreneurs aiming for venture capital funding are wondering what the investment temperature is. A good litmus test is by reviewing the past years venture capital funding activity.

It is no secret that venture capital firms invested much less in 2009 and 2010 than they did in prior years. This was largely due to the economic climate change. However, 2011 proved to be a year of growth and prosperity for venture capital firms. Here are a few interesting statistics about the year in review, as published by the National Venture Capital Association (nvca.org).

Investing Trajectory Examined

While 2011 did not see a large increase in the total number of deals (3,673 compared to 3,526 in 2010), the amount of total VC investment increased 19% from $23.2 billion in 2010 to $28.4 billion in 2011. That is more total investment that even in 2006, when the economic climate was booming.

Of those deals, 96% of venture capital funding went to businesses that were past the “seed” stage and into early stage, expansion, or later stage of their development. This was a change from previous years when VC firms planted almost twice as much seed money in new businesses in 2010.

With this trend, it seems likely that new businesses that are still in the “concept” stage will have tough competition for VC dollars. However, if your business is beyond first base, then you are more likely to hit a home run in raising VC.

First Time Deals on the Rise

Companies that are looking for first time venture capital funding can smile at the news that first-time deals rose 12% from the previous year to $5.0 billion. Looking ahead to 2012, new businesses with a solid record and an optimistic future can certainly catch the eye of venture capital firms.

The top three industries that received venture capital funding in 2011 were Software (with 24% of total funding), Biotechnology (17%), and Industrial/Energy (12%). These industries, along with medical devices and equipment, IT services, and media and entertainment, look to be continuing hot investment opportunities for venture capital firms.

Geographic Hot Spots for Venture Capital

Finally, where does the money go? California is still the hot spot for venture capital funding, with the Golden State raking in 48% of total VC investment funds. While CA is known for technology and software out of Silicon Valley, New York is now #2 with 10% of total funds. The trend in NY state is new internet companies who have found a welcome home base on the East coast.

2011’s numbers prove promising for companies who are growing, and we think 2012 will prove to bring good tidings as well for entrepreneurs.

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