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Nothing Ventured, Nothing Gained


Levels of investment capital stable despite sluggish economy.


Venture capitalists invested $7.4 billion in 990 deals in the second quarter of 2008, as compared with $7.5 billion in 977 deals during the first quarter, the National Venture Capital Association and PricewaterhouseCoopers report.

When the broad market stabilizes, this is likely to mean a steady stream of quality IPOs.

"The relatively stable level of investment this quarter across a broad swath of industries and all stages of development [shows] that there are no shortages of opportunities for innovative companies," says Mark Heesen, president of the National Venture Capital Association, a trade organization in Arlington, Virginia.

While clean technology didn't receive the most funding in the second quarter, the two largest deals -- $132 million and $115 million -- were in this sector.

Overall, clean technology, including alternative energy, pollution abatement, recycling, power supply and conservation, received an all-time quarterly venture capital funding high of $883.6 million for 65 deals.

This is about what you'd expect given the recent run-up in the price of oil. A barrel of oil recently traded at $129.94 on the New York Mercantile Exchange. The price hit a record $147.27 a barrel on July 11th.

Second-quarter venture capital investment in 219 software deals totaled $1.25 billion, underscoring the continued strength of technology.

Internet companies received $1.5 billion for 238 deals. The second quarter marked the fourth consecutive quarter with more than 200 Internet-related deals receiving venture capital funding - the highest quarterly level of Internet investing since 2001.

Life sciences, including biotechnology and medical devices, remain strong, with $1.9 billion invested across 209 deals.

The industrial and energy sectors received $1.2 billion for 89 deals.

Media and entertainment investments totaled $586 million for 110 deals.

The semiconductor industry received $328 million in venture capital funding for 39 deals, the lowest level since the fourth quarter of 2001.

"Despite the turmoil in the markets, the pace of investing in the first half of 2008 indicates that venture investing is on target to reach the $30 billion level this year, putting it on par with 2007 when $30.7 billion was invested, says Tracy Lefteroff, global managing partner for venture capital at PricewaterhouseCoopers.

Take heart, investors: Intel (INTC), Apple (AAPL) Microsoft (MSFT) and Cisco (CSCO) were once startups.

No positions in stocks mentioned.
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