Venture capital investments rose sharply in the second quarter from the first three months of 2012, but trailed the levels set in the same period last year, both in New England and for the United States as a whole.
New England companies received $843 million in investments from venture capital firms during the three months that ended June 30. That’s up nearly 13 percent from the first quarter, but well below the $1 billion invested in the first three months of 2011, according to the quarterly MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association, which was released Friday. For the first six months of 2012, venture funding in the region is down to $1.6 billion, slightly below the $1.7 billion during the same period last year.
Nationally, $7 billion was invested by venture capitalists in the second quarter, a 17 percent jump over the first three months of 2012. For the first six months of the year, venture investment nationally totaled $13.1 billion, down from $14.7 billion during the same period in 2011.
Harvest Power Inc. in Waltham, which provides organic waste management services to communities, raised $112 million during the second quarter — the largest venture investment in New England, and the second-largest in the United States, in that period.
Venture capitalists, and the entrepreneurs they fund, are seeking opportunities in new, online “cloud-based” products, and business models “like software-as-a-service,” said Adam Marcus, managing director of OpenView Venture Partners, a venture capital firm based in Boston.
Software developers are now raising money to target small and midsize companies that are expanding their use of software, according to Marcus.
“It used to be that software was primarily found in the finance and human resources departments,” he said. “Now, it’s moving into marketing and sales.”
Marcus was less optimistic about the dramatic increase in venture funding for consumer Internet and mobile companies. The number of early-stage deals in the United States reached its highest quarterly total since the beginning of 2001, with $2.1 billion going into 410 deals. Internet companies racked up 261 deals worth $1.8 billion nationally, a 31 percent increase in transactions.
“It’s a little troubling that early-stage software investing is approaching a level that we last saw in 2001, just before the dot-com bubble,” said Marcus. “And we know how that turned out.”
Software was the New England region’s most funded sector, with 29 percent of all venture investments in the second quarter. The industrial/energy sector, which includes robotics and clean energy, came in second with 18 percent of the total funds invested.
There was more than a 50 percent drop in funding for New England biotechnology and medical device companies during the second quarter, to $191.7 million. Nationally, venture investments in the life sciences sector fell 9 percent, to $1.4 billion. Mark Heesen, president of the National Venture Capital Association, attributed the lower level of investment to the “long and expensive road to getting drugs and medical devices approved.”
But in New England, the overall growth of venture investments from earlier this year “is a good sign that money continues to flow to the Northeast,” said Kevin Shaw, a partner in PricewaterhouseCoopers’s emerging company services practice in Boston.
Increased venture capital support also bodes well for upcoming initial public offerings, including online travel service Kayak.com, which has an office in Concord and will start trading on the Nasdaq Friday.
“Any time there’s venture money coming into the pipeline, it gives companies the luxury to build their products until they feel they are a strong candidate for an IPO,” Shaw said. “They don’t have to rush because they are running out of money.”
Battery Ventures Ltd., which has an office in Boston, was the most active New England venture capital firm with 17 deals in the second quarter, followed by Atlas Venture Ltd. in Cambridge, which had 14, according to the MoneyTree report, which is based on data from Thomson Reuters.
Silicon Valley in California continued to dominate the nation’s venture investment activity, pulling in four times as much as New England, which was second. The New York metropolitan area came in a distant third, with $568 million invested in the second quarter.