Who's Getting Financing These Days?

The 2Q 2004 MoneyTree™ Survey reported a continuing upward trend in venture capital in the second quarter of 2004. A total of $5.6 billion in investments flowed into 761 deals.

The report also showed a rebound in the number of companies receiving their first round of venture capital. After bumping along at historically low levels, the number of first-timers receiving financing increased to its highest level in two years. A total of 208 companies of all funded deals received a total of $1.2 billion in first round financings compared to 172 companies of all companies and $981 million in the previous quarter. First round financings represented 21% of all venture capital investments in the 2Q 2004 compared to 19% of all fundings in the 1Q 2004. The average funding per company for the quarter remained flat with the prior quarter at $5.6 million. Through the first half of 2004 a total of 380 companies received first-sequence funding of $2.1 billion.

Where's the money going?

Software companies grabbed the most funding for the second quarter in row - $250 million (22%). Biotechnology companies moved into the second spot from third position in the previous quarter with $185 million (16%) in funding in the second quarter up from $91 million in the previous quarter; Semiconductors dropped out of the top three as funding fell from $130 million the 1Q 2004 to $50 million (4%) in the 2Q 2004. Media and Entertainment companies moved into the third spot as funding jumped up to $111 million (10%) in the 2Q 2004 from $23 million in 1Q 2004.

Companies receiving the least: IT Services $21 million, Retailing and Distribution $11 million, Consumer Products and Services $2 million.

Just who is making these investments?

Here are the top five most active venture capital firms according to the MoneyTree™ Survey in the second quarter of 2004:

New Enterprise Associates in Baltimore, MD - 24 deals
U.S. Venture Partners in Menlo Park, CA - 16 deals
Morgenthaler Ventures in Menlo Park, CA - 15 deals
Morgenthaler Ventures in Menlo Park, CA - 15 deals
Draper Fisher Jurvetson in Menlo Park, CA - 14 deals
Polaris Venture Partners in Waltham, MA - 14 deals

The MoneyTree Survey results are available online at PWC MoneyTree,Venture Economics, and NVCA.

Knowing where investment monies are going and who is providing them is only half of the battle. You need to know how to capture the attention of these investors and secure funding from them.

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