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Venture funding falls 12 percent in second quarter

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Funding for U.S. startups fell 12 percent in the second quarter as venture capitalists poured less money into fewer deals than a year earlier. But the number of companies getting funded in the earliest stages of development reached the highest level in more than a decade — a hopeful sign for the broader economy and an indication that investors are willing to wait for returns.

A report due out Friday says that startup investments slipped to $7 billion in the April-June period, down from $8 billion in the same quarter a year earlier. The companies getting funded were mainly in the software, Internet, industrial, and energy sectors. There were 898 deals completed during the quarter, down 15 percent from 1,057 a year earlier.

The MoneyTree study was conducted by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. The study tracked four stages of venture capital funding. Depending on how far along companies are in development, they received either "seed", "early", "expansion" or "later-stage" funding.

Compared with the first quarter, both the amount of VC money and the number of overall deals increased. The April-June quarter saw most early-stage deals completed since the first quarter of 2001, with $2.1 billion going into 410 deals.

"That's really the bread and butter for VCs and hopefully a harbinger for good economic news for the country overall," said Mark Heesen, president of the NVCA. "If we're investing in early stage, that means we have some time and money that we didn't have in the recent past."

Many early-stage companies don't make it. Those that do become big job creators, he added.

Still, there are concerns among venture capitalists. Investments in the life sciences are falling. In the second quarter, venture capital firms poured $696.8 million into biotech startups, less than half of the $1.44 billion they invested a year earlier. Heesen explained that the time it takes a drug to get to market in the U.S. is getting longer —often more than 10 years. That makes funding difficult, even for patient investors.

Among the study's other notable items:

— Internet companies received the second-highest level of investment in more than a decade, with $1.8 billion going into 261 deals.

— Seed-stage companies received less than half of the funding that they did a year ago, with $199.4 million going into 63 deals. That's down from $422.8 million going into 130 deals.

— Three of top four deals were in the industrial and energy sectors. Electric car maker Fisker Automotive received $147.6 million, Harvest Power, a provider of organic waste management services, got $112 million and fuel cell technology company Bloom Energy, which develops small, natural-gas power generators for offices and factories, received $100 million.

— Pinterest Inc., the popular image-sharing website, tied for third place with $100 million in funding.

— Startups in the expansion stage received a total of $2.62 billion going into 232 deals, down from 272 deals and $2.38 billion a year ago.

— There were 193 later-stage deals during the quarter, totaling $2.09 billion. That's down from 274 deals and $2.97 billion in the second quarter of 2011.

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  1. Now if he'd just stay there...

  2. Daniel - what about the many US citizens who do NOT follow what the Bible teaches? The Hindus, Jews, Muslims and others who are all American citizens entitled to all rights as Americans?? This issue has NOTHING to do with "What the Bible says..." Keep all Churches separate from State! Pence's ongoing idiocy continues to make Indiana look like a backwards, homophobic state in the eyes of our nation. Can't we move on to bigger issues - like educating our kids?

  3. 1. IBJ should link to the referenced report. We are in the age of electronic media...not sharing information is lazy. Here is a link http://www.in.gov/gov/files/Blue_Ribbon_Panel_Report_July_9_2014.pdf 2. The article should provide more clarity about the make-up of this panel. The commenters are making this item out to be partisan, it does not appear the panel is partisan. Here is a list of the panel which appears to be balanced with different SME to add different perspectives http://www.in.gov/activecalendar/EventList.aspx?view=EventDetails&eventidn=138116?formation_id=189603 3. It suggests a by-pass, I do not see where this report suggests another "loop". 4. Henry, based on your kneejerk reaction, we would be better off if you moved to another state unless your post was meant as sarcasm in which case I say Well Done. 5. The article and report actually indicates need to improve rail and port infrastructure in direct contradiction to Shayla commentary. Specifically, recommendation is to consider passenger rail projects... 6. People have a voice with their elected officials. These are suggestions and do not represent "crony capitalism", etc. The report needs to be analyzed and the legislature can decide on priorities and spending. Don't like it, then vote in a new legislature but quit artificially creating issues where there are none! People need to sift through the politics and provide constructive criticism to the process rather than making uninformed comments in a public forum based on misinformation. IBJ should work harder to correct the record in these forums when blatant errors or misrepresentations are made.

  4. Joe ... Marriage is defined in the Bible ... it is mentioned in the Bible often. Marriage is not mentioned once in the US or Indiana Constitution ...

  5. Daniel - Educate me please: what does the Bible have to do with laws? If the government wasn't in the business of marriage to begin with, then it wouldn't have to "define" marriage at all. Marriage could be left as a personal, religious, or otherwise unregulated action, with no ties to taxes, legal status, etc. Then people could marry whomever they want, and all this silliness would go away. Remember to vote Libertarian in November.

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