Internet Enthusiasm Pushes Venture Investing to a Three-Year High

Venture capital investments rose to a three-year high in the second quarter, as GPs angled to capitalize on public market enthusiasm for companies such as LinkedIn, according to the MoneyTree Report.

Internet-related investments attracted almost a third of total dollars invested in the quarter and represented the most money put in the sector since the collapse of the dot-com bubble in the second quarter of 2001. Dollars going to Internet startups rose 72% from the first quarter, while deals volume climbed 46%, reinforcing the sense that another bubble is forming.

Life sciences investing also rose solidly while money going to cleantech companies fell.

Overall, venture investors put $7.5 billion into 966 deals in the second quarter, an increase of 5% from a year ago and 19% from the first quarter of 2011, according to PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters, which together release the MoneyTree Report. Thomson Reuters is the publisher of this blog.

Of the total, $2.3 billion went to 275 Internet startups. Five of the top 10 deals in the quarter were Internet related, including CSN Stores, which received $165 million; Gilt Groupe, which got $138 million;, which roped in $100 million; and Square, which collected $100 million.

Early-stage Internet companies also did well. First-time fundings hit a peak not seen since the final quarter of 2000, with first-sequence investments rising to $587 million, the report stated.

“Unfortunately, I’ve got Internet envy,” said David Douglass, a life sciences general partner at Delphi Ventures, who helped present the numbers on a conference call.

Even still, life sciences investments rose 37% from the first quarter to $2.1 billion as 206 deals were done, with more than half of dollars going to biotech startups.

Cleantech dollars, in contrast, fell 23% from the first quarter to $942 million. Deals were up 11%, however, with the average deal size falling to $12 million from $17 million in the first quarter.

Seed and early-stage fundings across all industries accounted for 48% of total deals in the quarter, up from 46% in the first quarter. Later-stage deals accounted for a quarter of quarterly volume, down slightly from the first quarter. The average later stage deal size was $11.5 million, up 6%.