NEW YORK: According to statistics from Dow Jones VentureSource, venture investors put $7.7 billion to work in 744 deals for U.S.-based companies during the second quarter of 2010. This is the highest quarterly total for capital invested since $8.4 billion was put into 699 deals during the third quarter of 2008.

"Fueled by investors' need to keep current portfolio companies funded and to begin investing from new funds, venture capital financing had a strong quarter," said Jessica Canning, global research director for Dow Jones VentureSource. "Deal activity and capital invested in venture-backed companies is once again near levels seen before the start of the economic recession in 2008."

The second quarter's deal count represents a 13% increase from the 656 deals closed during the same period last year, and capital raised is up 26% from the $6.1 billion invested in the year-ago period.

IT Sees Highest Deal Count, But Healthcare Garners More Dollars

Information Technology (IT) and Healthcare continued to be the strongest industries for deals closed and dollars invested though no clear leader emerged as IT garnered the largest proportion of deals but Healthcare claimed more dollars.

Scott Austin, editor of Dow Jones VentureWire, said: "Venture investment in healthcare companies has gained momentum over the last several years, a trend that is likely to continue. One catalyst for recent growth is venture firms placing a premium on drug development companies nearing commercialization, requiring large sums to get their drugs through Phase III trials."

Healthcare companies raised $2.7 billion for 201 deals, a 13% increase in capital raised from the $2.4 billion put into 189 deals during the second quarter of 2009. Within Healthcare, the Biopharmaceuticals sector continued to see the highest level of activity. Ninety-five Biopharmaceuticals deals raised $1.2 billion, a 30% increase in deals but slight drop in capital raised from the same period last year.

In IT, 231 deals raised $1.9 billion, up from the second quarter of 2009, which saw 208 deals raise $1.6 billion. Software garnered the largest slice of capital as 156 deals raised $908 million, up from the 132 deals that raised $761 million in the second quarter of last year.

Energy and Services Industries See Growth

The Energy & Utilities industry garnered $1.1 billion for 26 deals during the second quarter. Deals were on par with the year-ago period, but capital raised jumped 86% thanks to a few large, later-stage deals. The Energy & Utilities industry claimed the nation's largest deal in the second quarter — a $350 million round raised by Better Place, a Palo Alto, Calif.-based company that provides support infrastructure for electric vehicles.

The Business and Consumer Services industries also saw growth. In Business and Financial Services, 117 deals raised $814 million, up from 96 deals that raised $707 million in the year-ago period. In Consumer Services, 120 deals raised $847 million, up from 89 deals that garnered $644 million during the second quarter of 2009.

Investment in the Web-heavy Consumer Information Services sector, part of the Consumer Services industry, rose 45% as 92 deals raised $710 million. This sector also bucked the trend toward later-stage deals as 57% of Consumer Information Services deals were for seed- and early-stage rounds, making Consumer Services the only industry group with over half of investments going to early-stage deals.

Later-Stage Deals Pick Up, Claim More Capital

Later-stage deals accounted for 44% of the second quarter's deals and 62% of total capital raised. This is up from the 39% of deals and 56% of capital that later-stage deals claimed in the same period last year. Seed- and first-rounds accounted for 32% of deals and claimed 15% of capital raised during the most recent quarter, down from the same period last year when early-stage rounds accounted for 35% of deal activity and 19% of capital raised.

The median deal size for the second quarter of 2010 was $4.9 million, down slightly from the $5 million seen in the same period last year.

For information on Dow Jones VentureSource's research methodology, visit http://bit.ly/VSFAQs.

For general information about Dow Jones VentureSource, visit http://www.dowjones.com/privatemarkets. Journalists can contact Kim Gagliardi at +1 603-864-8873 or kimberly.gagliardi@dowjones.com with questions or requests for more information.