Start-up investments were down in 2012
A new study shows that funding for business start-ups declined in 2012, the first time that has happened in three years, as venture capitalists spent less on fewer deals.
A new study shows that funding for business start-ups declined in 2012, the first time that has happened in three years, as venture capitalists spent less on fewer deals.
Capital-intense sectors such as clean technology and life sciences were among the hardest hit, according to a MoneyTree study released Friday that was conducted by PriceWaterHouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters.
In all of 2012, start-up investments fell 10 percent, to $26.52 billion from $29.46 billion, the study found. There were 3,698 deals completed, down 6 percent from 3,937 in 2011.
Venture investments also declined, by 13 percent, in the final quarter of the year, to $6.4 billion from $7.38 billion a year earlier, though the number of deals was the same in both quarters - 968.
"General economic uncertainty continues to hinder capital investments, and venture capitalists are no different," said Tracy T. Lefteroff, global managing partner of the venture-capital practice at PwC U.S.
"As the number of new funds being raised continues to shrink, venture capitalists are being more discriminating with where they're willing to place new bets," Lefteroff said. "At the same time, they're holding on to reserves to continue to support the companies already in their portfolio."
Ranked by industry, software remained the largest investment sector last year, the report found, with $8.27 billion invested in 1,266 deals. That was up from $7.51 billion invested in 1,176 deals in 2011.
San Francisco's SquareTrade Inc., which provides electronics warranties, landed the biggest round of funding in 2012 - $238 million from Bain Capital.
The mobile-payments start-up Square Inc. was in second place, with $200 million secured from Citi Ventures and others.