U.S.-based companies raised $6.3 billion through 717 venture capital deals during the first quarter of 2012, an 18% decline in capital and 9% decline in deals compared with the same period last year, according to Dow Jones VentureSource.
"The declines were pretty evenly spread across industries so there weren't any big winners or big losers in the quarter, but there were some surprises. Investment in consumer Internet companies fell after two exceptional investment years, while the IT industry fared well thanks to strong interest in software start-ups," said Jessica Canning, global research director for Dow Jones VentureSource.
Despite the down quarter, California maintained its status as the host state for the largest single share of venture capital funding, capturing a 47% share. That was more than twice as much as the second- and third-ranking regions combined. The Boston region accounted for a 17% share, and the New York City region pulled in 5%.
Still, the numbers were down significantly for the state. The were 297 deals that raised $2.9 billion in California in the first quarter of 2012, a 12% decline in deals and a 23% decline in capital raised compared with a year earlier.
"California continues to lead in VC funding," said Mark Sogomian, a partner at Ernst & Young in Los Angeles. "It was down in the number of deals made and in dollar amounts, but it's still the state that attracts the most promising and innovative companies."
In the Los Angeles Metropolitan area, the number of venture capital deals increased in the first quarter to 44, compared with 37 a year earlier, but there was a steep drop of 29.8% in the amount of funding, to $248.97 million, compared with the same period a year earlier.
Investment in the consumer Internet sector, which includes social media, entertainment and shopping aggregators, fell 76% to $375 million, and deals fell 17% to 88 during the first quarter. In the first quarter of 2011, however, the investment total was inflated by large closings from mature companies, including Zynga and LivingSocial, which raised $870 million combined.
"Now that some of the mature Internet companies that soaked up billions in venture capital the last couple of years have gone public or are near an exit, we'll see if venture investors approach a fresh crop of start-ups with the same zeal or if investment remains at the level we saw in the first quarter," said Zoran Basich, editor of Dow Jones VentureWire.
Information technology was the only major industry that saw a year-over-year increase for both deals and capital raised. IT companies raised $2 billion through 257 deals, a 14% increase in capital invested and a 2% increase in deals.
The software sector accounted for the largest proportion of IT deals as companies raised $1.3 billion for 196 deals, a 61% increase in capital raised and a 6% increase in deals.
Several large rounds for later-stage energy companies boosted the capital invested in the energy and utilities industry, despite a decrease in deals. During the first quarter, $943 million was raised through 29 deals, a 44% increase in capital raised and one fewer transaction than was completed in the first quarter of 2011.
As usual, renewable energy companies accounted for most of the deals, raising $513 million through 23 deals.