I just read the Q1 2011 report from CB Insights, which shows venture capital is back. Overall, investors put $7.5 billion to work across 738 financing deals with U.S. startups. That represents a $1.5 billion jump in funding over the same quarter of 2010 with a similar number of deals, so it clearly shows a trend to larger deal sizes for fewer startups.
To me, this indicates that venture capitalists (VCs) are looking for business, but not from first-time startups. Sure, there is always some seed funding (10% of overall deal flow), but you can bet that this money goes to entrepreneurs who have been there before and won. Angels are also moving up-stage, leaving a bigger and bigger black hole for new startups. Your friends and family are really the only answer until you have a significant revenue stream.
Back to VCs, Silicon Valley venture capital firms are still the most active. In fact, most of the most active investment firms are located there, although NY now has moved solidly into second place (ahead of Boston). That doesn’t mean that you have to live in one of these places to be considered, but it helps.
It also helps to keep track of the business sectors VCs are focusing on. Greentech deals had a breakout quarter with deals and dollars up 45% and 145% respectively vs. Q4 2010. Internet and healthcare deals stayed flat and funding actually dipped. Energy deals climbed with funding increasing significantly. Every quarter seems to have a new hottest sector, but these four will be near the top for some time to come.
So what can you do to get to the head of the venture capital investment queue? Here are some key action items that will give you some priority:
StartUp Pro is Marty Zwilling