Venture Capital Investment in Clean Technology Shows Considerable Strength in Th

"While Software and Biotechnology upheld their historical placements asthe top funded industries, venture capitalists seemed to diversify acrossvarious industries this quarter," said Tracy Lefteroff, global managingpartner of the venture capital practice, PricewaterhouseCoopers. "In somecases, investment trends reflected top issues facing the nation. Clean Tech,for example, demonstrated its viability as an emerging sector by producingthree of the top five deals this quarter, with one deal reaching the $100million plateau, marking it as one of the largest deals ever for the sector.Overall there was strong deal activity this quarter keeping us on pace for thelargest investment year since 2001."

"The stability of the overall venture capital investment levels, coupledwith an increased focus on the most innovative new industry sectors such asalternative energy suggests that the venture capital industry is continuing tosupport our country's most promising start-up companies in a rational anddeliberate manner," said Mark Heesen, president of the National VentureCapital Association. "We were particularly pleased to see the sustainabilityof first time financings levels. Many new companies are seeking and winningventure capital investment which equates to growth for the US economy as awhole."

Industry Analysis

The Software sector narrowly edged out Biotechnology as the number oneindustry sector for the quarter with $1.11 billion going into 187 deals. Thisinvestment level was down from the previous quarter when Software hit a sixyear high with $1.5 billion going into 253 deals.

The Life Sciences sector (Biotechnology and Medical Devices combined) hadanother strong quarter with $1.9 billion going into 175 deals compared to theprevious quarter when $2.2 billion went into 233 deals. Both Biotech andMedical Device investing slowed in Q3 with fewer deals completed and dollarsinvested. Biotechnology had $1.1 billion going into 99 deals; Medical Deviceshad $825 million going into 76 deals in the quarter.

The Clean Tech sector, which crosses traditional MoneyTree sectors andcomprises alternative energy, pollution and recycling, power supplies andconservation, saw record investment levels with $844 million going into 62deals in the third quarter. This represented 80 percent increase in thedollar level and 35 percent increase in the number of deals in the Clean Techsector in the second quarter of the year.

Internet-specific companies garnered $1.1 billion into 195 deals in thethird quarter, a 17 percent increase in dollars over the second quarter when$903 million went into 160 deals. Four of the last five quarters have seenInternet-specific investment of more than $1 billion. 'Internet-Specific' isa discrete classification assigned to a company with a business model that isfundamentally dependent on the Internet, regardless of the company's primaryindustry category.

Media and Entertainment had a positive quarter with $509 million goinginto 96 deals, an increase in both deals and dollars from the second quarterwhen $464 million went into 77 deals. Other industry sectors which sawincreases in both dollars and deals include Financial Services, HealthcareServices, and IT Services. Both Telecommunications and Semiconductors sawmore dollars but fewer deals in the third quarter.

First-Time Financings

The dollar value of first time deals (companies receiving venture capitalfor the first time) remained at higher levels with $1.7 billion going into 273first time deals. This is almost even with the second quarter when $1.7billion went into 347 first time deals.

Companies in Industrial/Energy, Medical Devices, Biotechnology, Softwareand Media/Entertainment received the highest level of first-time dollars.Financial Services also saw more first time bets this quarter than in thesecond quarter. Telecommunications saw more first time dollars.

The average first time deal in the third quarter was $6.3 million comparedto $5.0 million one quarter ago. Seed/Early stage companies received thebulk of first-time investments garnering 45 percent of the dollars and 69percent of the deals.

Stage of Development

Seed and Early stage investing dollars in the third quarter fell 15percent to $1.4 billion into 305 deals. This level compares to an extremelystrong second quarter when venture capitalists invested $1.7 billion into 395deals. Seed/Early stage deals accounted for 34 percent of total deal volumein the third quarter compared to 40 percent in the second quarter of the year.The average Seed deal in the third quarter was $2.4 million, up from $2.0million in the second quarter; the average Early stage deal was $5.6 million,also up from $5.0 in the second quarter.

Expansion stage dollars increased by 16 percent in the third quarter to$2.7 billion from $2.3 billion in the second quarter. The number of dealshowever, declined slightly from 302 deals in the second quarter to 294 dealsin the third quarter. Overall, Expansion stage deals accounted for 33 percentof venture deals in the quarter. The average Expansion stage deal was $9.2million, up significantly from $7.8 million in the second quarter

Later stage deals fell slightly in dollar value with $3.0 billion goinginto 288 deals and accounting for 33 percent of total volume. In the secondquarter of this year $3.2 billion went into 303 deals. The average Laterstage deal in the third quarter was $10.3 million which was also slightlylower than the second quarter when the average Later stage deal size was $10.6million.

International Investing

In the third quarter of 2007, U.S.-based venture capitalists invested $206million into 31 deals in China representing a 52 percent decline in dollarvolume from the second quarter when $429 million was invested in 38 deals.Also in the quarter, U.S. venture capitalists invested $248 million in 22deals in India, a more than doubling of second quarter investments of $119million into 18 companies. These figures are reported separately and are notincluded in the aggregate totals above.

MoneyTree Report results are available online at and.

The National Venture Capital Association (NVCA) represents approximately480 venture capital and private equity firms. NVCA's mission is to fostergreater understanding of the importance of venture capital to the U.S.economy, and support entrepreneurial activity and innovation. According to a2007 Global Insight study, venture-backed companies accounted for 10.4 millionjobs and $2.3 trillion in revenue in the U.S. in 2006. The NVCA represents thepublic policy interests of the venture capital community, strives to maintainhigh professional standards, provides reliable industry data, sponsorsprofessional development, and facilitates interaction among its members. Formore information about the NVCA, please visit .

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