NEW YORK – Venture capitalists invested $21.8 billion in 3,277 deals in 2010, an increase of 19 percent in dollars and a 12 percent rise in deals over the prior year, the first time the annual investment level has increased since 2007.

Investments in the fourth quarter of 2010 totaled $5.0 billion in 765 deals, a 2 percent increase in dollars but a 3 percent decrease in deals from the third quarter of 2010 when $4.9 billion went into 789 deals.

California was the top state to receive funding in 2010, with 50 percent of total US venture-backed investment for the third consecutive year. Massachusetts was in second place, capturing 11 percent of total US dollars. New York and Texas attracted 6 percent and 4 percent of total dollars, respectively. All but one of the top ten states reported an increase in 2010 funding when compared to full year 2009.

Double-digit increases in investments in 2010 were spread across almost every industry, including the Clean Technol�ogy and Internet-Specific sectors. Investment dollars also increased across every stage of development category, with the exception of a 2 percent decrease in Seed stage invest�ments. First-time financings rose in 2010 compared to the prior year, however, fourth quarter investing did show a decline in both first-time dollars and deals when compared to Q3 2010.

The Software industry recaptured its status as the single largest investment sector for the year, rising 20 percent over 2009 to $4.0 billion in 2010, which was invested into 835 deals; a 21 percent rise over the prior year. Biotechnology funding increased modestly in 2010 by 3 percent in dollars and 8 percent in deals, with $3.7 billion going into 460 deals, dropping it to the second largest investment sector for the year in terms of dollars and deals. The Medical Device industry fell 9 percent in dollars and was flat in terms of deals in 2010, finishing the year as the fourth largest sector with $2.3 billion going into 324 deals. The Life Sciences sector (Biotech and Medical Devices combined) accounted for 28 percent of all venture capital dollars invested in 2010 compared to 33 percent in 2009.

The Clean Technology sector experienced a significant increase in 2010 with $3.7 billion invested in 267 deals. This investment level represents a 76 percent increase in dollars and a 37 percent increase in deal volume from 2009 when $2.1 billion went into 195 deals. These investment levels remained below 2008 levels of $4.0 billion into 277 deals, which was an all-time high. With five of the top ten deals going to Clean Technology, funding in the sector accounted for 17 percent of all venture capital dollars in 2010 compared to 11 percent in 2009.

Internet-specific companies also saw an increase in investing in 2010. The $3.78 billion going into 729 deals represented a 28 percent increase in dollars and 14 percent in deals from 2009 when $2.9 billion went into 638 deals. Internet-specific is a discrete classification assigned to a company whose business model is fundamentally dependent on the Internet, regardless of the company?s primary industry category. These companies accounted for 17 percent of all venture capital dollars in 2010, up from 16 percent in 2009.

Software investing also increased in the fourth quarter of 2010 to the highest quarterly dollar level since Q3 2007 with $1.1 billion going into 218 deals. Software was the number one sector for dollars invested and total number of deals in the fourth quarter and was the only industry sector to receive more than $1 billion in the fourth quarter. For the fourth quarter, Biotechnology funding declined 24 percent in dollars and fell 15 percent in the number of deals from the third quarter with $685 million going into 94 rounds.

For the fourth quarter, Medical Devices saw a drop of 31 percent in dollars and 15 percent in deals from Q3 2010 with $400 million going into 71 deals. In the fourth quar�ter, venture capitalists invested $765 million into 57 Clean Technology deals. Four of the top 10 deals in the fourth quarter fell into the Clean Technology category. Clean Technology crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation.

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