Venture capitalists heart software

Software startups and growth companies received $2.3 billion in funding from investors during the second quarter of 2012 — the highest investment total for the sector since the second quarter of 2001.
Written by Joe McKendrick, Contributing Writer

So far, this has been a good year to start or grow a software or Internet company. Money has been flowing in from the venture capital segment.

That’s the word from the latest MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.

The software industry received the highest level of funding for all industries, the report states, with $2.3 billion out of $7 billion invested during the second quarter of 2012 — the highest investment total for the sector since the second quarter of 2001.  This level of investment represents a 38 percent increase in dollars, compared to $1.7 billion invested in the first quarter.  The software industry also had the most deals completed in Q2 with 290 rounds, which represents a 16 percent increase from the 251 rounds completed in the first quarter of 2012.

Internet-specific companies received the second highest level of investment in more than a decade with $1.8 billion going into 261 deals, a 22 percent increase in dollars and a 31 percent increase in deals from the first quarter, when $1.5 billion went into 199 deals. The MoneyTree analysis puts investment in Internet companies as surpassing the $1 billion dollar mark each quarter for the past two years, and two of the top 10 deals for the quarter were in the Internet-specific category.  “Internet-specific” is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.

“Software and Internet companies continue to be attractive industries for VCs since most of these companies tend to be capital efficient and don’t require large amounts of capital to operate,” says Tracy Lefteroff, global managing partner of the venture capital practice at PwC US.

(Photo: Wikipedia.)

(Cross-posted at SmartPlanet Business Brains.)

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