US venture capital investment reaches five-year high

Growing interest in information services, medical equipment and alternative energy boosted venture capital investment in the US in 2006, taking investment levels to a five-year high at $25.75bn.

Venture capital investment in US companies reached their highest level for five years in 2006, according to research by Ernst & Young and Dow Jones VentureOne.  There were a total of 2,454 deals in 2006, just ahead of the 2,422 deals completed in 2005, and capital investment reached $25.75 billion (€19.9 billion), an eight percent increase over the year before.

Alternative energy: deal-flow doubled in 2006

The report says the boost came from interest in the information services, medical equipment and alternative energy sectors.

The largest deal of 2006 was a technology deal, the $150 million round-C fundraising for Amp’d Mobile, a Los Angeles-based wireless broadband service company in April. Investors in the round include the venture arms of Intel, a computer hardware manufacturer, and Qualcomm, a provider of wireless communication products, according to a statement.

Overall deal count in information technology fell by 21 deals from the previous year but capital investment in the sector increased by two percent to $13.76 billion, the most money deployed in technology companies since 2001.

The health care sector showed the most significant increase last year, as deal flow rose five percent over 2005 to 628 deals, and capital investment grew 12 percent to $8.25 billion.

Deal-flow in the alternative energy sector more than doubled to 41 deals in 2006, while the capital investment increased by 190 percent to $537.6 million.

Investment in business, consumer and retail products and services companies also increased over last year, with a total of 274 deals and $2.63 billion in capital.

The average round size in 2006 was $7 million, up from $6.5 million in 2005, and the highest annual average since 2000. Investors focused more than a third of activity on early-stage financings for the second year in a row, with seed and first-round deals making up 36 percent of the deal flow in 2006.  About the same concentration of deal flow went to later-stage deals.