Venture capitalists tightened purse strings last quarter, year

SAN FRANCISCO Fri Jan 18, 2013 12:00am EST

SAN FRANCISCO Jan 18 (Reuters) - U.S. venture capitalists invested $6.4 billion in start-up companies in the fourth quarter, continuing a slowdown in spending, according to a report from the National Venture Capital Association and consultancy PriceWaterhouseCoopers.

The $6.4 billion was spent across 968 deals. That represents a 13 percent decline in dollar terms over the prior-year period. For the full year, investments fell 10 percent to $26.52 billion.

Seed-stage companies -- those at the very earliest stages of development -- saw a slight rise in investments for the quarter, to $119.4 million, but an overall 38 percent drop for the year, to $475.7 million. That is the lowest yearly total since 2003.

Funding seed-stage companies is generally considered important for uncovering the future Googles, Facebooks and other companies that eventually help build industries and employ thousands.

Software continued to attract the most dollars, winning $2.09 billion in investment last quarter, a slight gain over the previous year, according to the report.

The second-biggest sector, biotechnology, attracted $1.29 billion, down six percent on a year ago, while most other sectors also saw declines in the quarter.

Sectors that gained included medical devices and equipment, where investment rose 12 percent to $581 million, and healthcare services, which gained 150 percent to $143.3 million.

The single biggest venture deal of the quarter was a $155.9 million investment in biopharmaceutical company Intarcia Therapeutics by New Enterprise Associates and others. For the year, it was a $238 million investment in warranty company SquareTrade by Bain Capital.

The report is based on data from Thomson Reuters.