AP, LTW

Venture capitalists funneled more money into U.S. startups in the second quarter, indicating continuing confidence that the economy is on the mend.

New data from PricewaterhouseCoopers, Thomson Reuters and the shows that startup investments in the April-June period climbed 53 percent from the same three months in 2009 to $6.5 billion. This is the most money invested in startups since the third quarter of 2008.

North Carolina investors had a busy month, making 14 deals worth more than $130 million. That was good enough to rank the state seventh nationally in deals. North Carolina generally ranks close to or in the top 10.

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N.C. deals as reported in the quarterly Moneytree report:

• BNC Bancorp, High Point, $35 million
• Benchmark Solutions, Raleigh, amount undisclosed
• Cempra Pharmaceuticals, Chapel Hill, $20.5 million
• Centice Corporation, Morrisville, $1.22 million
• Consert, Raleigh, $17.7 million
• F-Origin, Morrisville, $1.6 million
• HyperBranch Medical Technology, Durham, $2.1 million
• Liquidia Technologies, Durham, $5 million
• LivingWell Health Solutions, Charlotte, amount undisclosed
• SolidSpace, Winston-Salem, amount undisclosed
• Southeast TechInventures, Durham, $128,000
• StrikeIron, Cary, $1.76 million
• Tear Science, Morrisville, $44.5 million
• Zift Solutions, Raleigh, $500,000

Georgia deals totaled 17, generating $34 million.

Two deals in South Carolina were worth $4.2 million.

The top 10:

1. California (369), $3.8 billion
2. Massachusetts (86), $558 million
3. New York (69), $321 million
4. Texas (39), $188.8 million
5. Washington (37), $187 million
6. Pennsylvania (41), $176 million
7. North Carolina (14), $130 million
8. Florida (10), $108 million
9. Illinois (16), $107 million
10. Virginia (18), $105 million

The funding was divided among 906 startups, nearly 29 percent more than a year ago and the largest number since the fourth quarter of 2008.

"As the exit market begins to show signs of life, venture capitalists are now able to look increasingly at new investments outside their existing portfolio,” said Mark Heesen, president of the National Venture Capital Association.

“This dynamic translates into momentum in the seed and early stage sectors where valuations remain reasonable and opportunities are great,” he added. “Investment in the clean technology and life sciences sectors, which are generally longer term and more capital intensive in nature, are balanced by smaller deals within the information technology sectors creating a diversity of opportunities for success for entrepreneurs, VCs and limited partners alike.”

Funding went to more seed and early-stage companies than in any quarter since mid-2007. That signals investors are feeling good about investing in new ideas even though the market for acquisitions and public stock offerings for more mature startups continues to be rough — meaning it’ll be awhile before venture capitalists see returns on their investments.

"Venture capitalists are feeling more positive about the economic outlook for investment, based upon the jump we saw in VC funding this quarter," said Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers. "The quarterly investment total surpassed the $6 billion mark for the first time since Q3 2008 and the number of deals was the highest we’ve seen since Q4 of 2008.

“The rise in companies lining up to go public in the Life Sciences space in Q2 was also a likely driver of the strong rebound we saw in investing in this sector during the quarter,” Lefteroff added. And, a $350 million deal, the biggest deal in the second quarter, pushed the Clean Technology sector to its highest total on record. If the markets remain positive, we’ll likely continue to see robust investment levels for the remainder of the year, with VC funding in 2010 poised to surpass 2009 levels."

While there are still many later-stage companies waiting to go public or be acquired, "the venture capital industry has been able to turn its attention to the next crop of companies," John Taylor, vice president of research for the NVCA, said during a conference call with reporters Thursday.

As in the past, biotechnology startups snagged the most funding in the quarter, receiving $1.3 billion in investments, up 43 percent from the same period in 2009.

Last year, investments in that sector fell, but venture capitalists have continued to invest heavily because large pharmaceutical companies are still interested in buying startups that are developing promising drugs.

Investments in clean technology companies tripled to $1.5 billion — its biggest quarter since the study began keeping track of investments in 1995 — while software company investments climbed nearly 48 percent to $1 billion.

Money that went toward first-round financing climbed 46 percent to $1.1 billion. There were 281 companies that got their first financing during the period, compared with 182 in the same quarter last year. Most of these deals were with companies in the seed and early stages of development, which is consistent with past activity and shows investors continue to be optimistic about funding new ideas.

The quarter’s biggest deal was $350 million; it went to Better Place Inc., which offers electric vehicle support services. The second-biggest deal was $150 million, for BrightSource Energy Inc., which makes large-scale solar power plants.

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