Venture funding reaches five-year high in Q1

Investors empty pockets as start-ups eye public markets

Venture capitalists put more dollars behind fewer companies in the first quarter of 2007, marking the highest amount invested in start-ups since the fourth quarter of 2001.

While companies in the life-sciences and medical-device industries experienced an unusually high amount of funding, IT start-ups also garnered a significant chunk of the $7. 1 billion invested in 778 deals during the first quarter of this year, according to the MoneyTree Report. PricewaterhouseCoopers and the National Venture Capital Association compiled the report based on data by Thomson Financial.

Significantly, the first quarter of 2007 saw venture investments break out of the $5 billion-to-$7 billion quarterly range seen over the last five years. In addition, more later-stage investments were made during this period than first-time or early-stage investments. These two factors signal that VCs may be pouring their money into companies that are on the verge of going public or getting acquired.

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Venture capitalists put more dollars behind fewer companies in the first quarter of 2007, marking the highest amount invested in start-ups since the fourth quarter of 2001.

While companies in the life-sciences and medical-device industries experienced an unusually high amount of funding, IT start-ups also garnered a significant chunk of the $7. 1 billion invested in 778 deals during the first quarter of this year, according to the MoneyTree Report. PricewaterhouseCoopers and the National Venture Capital Association compiled the report based on data by Thomson Financial.

Significantly, the first quarter of 2007 saw venture investments break out of the $5 billion-to-$7 billion quarterly range seen over the last five years. In addition, more later-stage investments were made during this period than first-time or early-stage investments. These two factors signal that VCs may be pouring their money into companies that are on the verge of going public or getting acquired.

“One quarter doesn’t constitute a trend, but the breakout [of the $5 billion to $7 billion range] bodes well for the rest of 2007,” says Darrell Pinto, director of global private equity performance with Thomson Financial.