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Software and Biotech Companies Lead the Pack in VC Funding

Venture-capital funding increased slightly in the second quarter from the previous quarter, according to a new report.
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Venture-capital funding increased slightly in the second quarter from the previous quarter, with software and biotechnology companies leading the pack, according to a report released today.

The MoneyTree report, released by PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association and based on data provided by Thomson Reuters, shows venture capitalists invested $6.7 billion in 913 deals, up 12 percent in terms of dollars and up 2 percent in deal volume from the first quarter.

It comes on the heels of another report released Thursday that paints a different picture. That report, from Dow Jones VentureSource, says second-quarter dollar volume fell 2 percent from the previous quarter, and the number of deals declined 0.5 percent from the first quarter. According to VentureSource, the second quarter was the worst for VC investing since the first quarter of 2010, with 801 U.S.-based companies raising $7.2 billion from VC firms. 

Related: VC Funding of U.S. Companies Falls to Lowest Level in 3 Years

The companies attributed the discrepancies in the data to different methodologies used to track venture-capital investing. The MoneyTree report, for example, is based on the funding date when cash actually changes hands, as opposed to when the money is committed, says Mark McCaffrey, global software leader for PwC.

Looking at the longer view, McCaffrey says the VC industry has been relatively consistent over the first half of 2013 and expects investment levels to remain about the same or improve slightly for the rest of the year.

According to the MoneyTree report, software companies received the highest level of funding among all industries, despite dropping 7 percent from the prior quarter to $2.1 billion. Even with the weakening, it was the fifth consecutive quarter where investors poured more than $2 billion into the sector. What's more, the software industry counted 325 deals, the most of any sector in the second quarter. 

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While companies that focus on cloud computing, social media and other user-friendly applications continue to generate strong interest from investors, McCaffrey says other types of software companies are having a harder time getting funding. "They have to prove out their model a bit more these days," he says.

The biotechnology industry received the second-largest dollar investment, with $1.3 billion going into 103 deals in the second quarter, according to MoneyTree. This sector rose 41 percent in dollars and 4 percent in deals from the prior quarter.

Meanwhile, the clean technology sector had another rough quarter, the report shows. The sector, which includes alternative energy, power supplies and conservation, declined 6 percent in dollars and 31 percent in deals from the prior quarter's $364 million and 43 deals. 

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