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Venture investment increases

By D.C. Denison
Globe Staff / April 15, 2011

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Investments by venture capitalists in start-up and growth companies rose in the first quarter of 2011, both in New England and across the nation.

In the first three months of the year, venture investments in New England companies were up 13 percent from the last quarter of 2010, to $639 million. The number of deals fell from 93 to 90 during that same period, according to the MoneyTree Report, published today by PricewaterhouseCoopers LLP and the National Venture Capital Association and based on data provided by Thomson Reuters.

The largest deal in New England during the first quarter was $52 million for Harvest Power Inc. in Waltham, which manages organic waste generated from urban populations and industry.

“New England’s deals show a good distribution across sectors,’’ said Ned Goss, director of PricewaterhouseCoopers’ emerging company services practice in Boston. “If you look at our top 10 deals for the quarter, there’s some clean technology, some medical devices, some IT services, some biotech, some software. That’s good for the region.’’

Nationally, $5.9 billion was invested in 736 deals in the first three months of this year, an increase of 5 percent compared with the fourth quarter of 2010. The number of deals, however, fell 11 percent compared with the previous quarter.

Five of the top 10 US venture deals in the first quarter were in the clean-tech sector, including two companies that are involved in solar energy, BrightSource Energy Inc. and SoloPower Inc.,and two electric car companies, Fisker Automotive Inc. and Coda Automotive Inc.

“There was not a lot of excitement in the quarter, and that’s a good thing,’’ said Mark Heesen, president of the National Venture Capital Association. “What we’re seeing is venture capitalists doing what they do: investing consistently across all sectors.’’

One reason why the number of deals went down as the total investment dollars rose: Some of the most popular sectors, clean tech and life sciences, demand more significant, long-term investments, Heesen said. Internet companies, which traditionally raise less money, were down in both number of deals and total amount raised.

With the first quarter results New England maintains its place as the second biggest market for venture investment in the United States. Silicon Valley in California was the top region for venture capital, landing $2.5 billion in deals. The New York metropolitan area was third at $580 million in overall venture capital invested.

The top New England sectors that attracted venture funds were medical devices and equipment, at $145 million; industrial/energy, at $112 million; and software, at $102 million.

Yesterday, a New York research firm, CB Insights, released quarterly venture data that showed that New York had surpassed Massachusetts as the number two market for venture-funded tech start-ups. Although the MoneyTree Report categorizes venture investments differently, its data broadly confirmed the trend.

In technology categories, New York attracted 33 venture deals worth $326 million in the first quarter, compared with 37 deals worth $213 million for Massachusetts.

“If you make comparisons between New York and Massachusetts on these very hot tech sectors, it’s definitely an arm wrestle,’’ said Goss. “But add clean tech and life sciences, and Massachusetts is still clearly dominant.’’

D.C. Denison can be reached at denison@globe.com.