Late Surge On Internet Deals Heat Up VC Funding

2010 ended with a bang for start-up funding with deals and dollars hitting an eight-quarter high in the fourth quarter of 2010. Buoyed by a raft of Internet deals, fourth quarter VC funding hit $6.5 billion spread out over 735 deals. It might sound a little bubblicious for some but the latest numbers from CB Insights reflect some serious growth in 2010, which managed to crawl out for the shadow of a dismal 2009.

CB Insights said 2010 funding reached $23.7 billion invested in 2,792 deals, a 14 percent jump in funding and 13 percent increase in deals over 2009. The frenzy came to a head in December, which hit the second highest deal flow and the highest venture funding in the last 15 months.

Internet investments showed no sign of flagging and grew to 272 deals in the fourth quarter, or 37 percent of all deals, compared to 33 percent in the third quarter. The sector raised $2.5 billion, most notably Groupon’s almost $1 billion round, but there were plenty of other big investments including $200 million for Twitter and $175 million for Living Social. Early stage deals were still hot with seed stage investments holding steady at 11 percent of deals while Series A deals grew 3 points sequentially to 36 percent in the fourth quarter.

New York rode the Internet rocket and has unseated Massachusetts as No. 2 in tech funding behind California with $1.22 billion. New York, over the last five quarter, has just pushed past its rival to the north in deals and dollars thanks to a strong surge in the fourth quarter. Massachusetts remained No. 2 in overall funding behind California.

Here are a few other interesting numbers:

  • The share of early stage funding dollars for Internet companies dropped to 13 percent in the fourth quarter, down from 32 percent in the third quarter and 23 percent in the same period a year earlier.
  • Late stage funding for companies like Twitter and Groupon skewed the numbers toward later rounds. The median deal size for Series D companies was $19 million while the median deal size for Series E was $20 million.
  • San Francisco had 64 deals worth $517 million. New York City recorded 63 deals for $457 million in the fourth quarter while Cambridge, Mass. had 18 deals for $258 million.
  • California raked in $2.63 billion overall in the fourth quarter, flat with the same quarter in 2009. Massachusetts VC investments fell to $630 million in the fourth quarter compared to $653 million a year earlier. New York investments tallied $466 million, a 90 percent increase over the previous year.

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