VC funding up, biotech outpaces other industries

Venture-capital funding continued to rise in the fourth quarter, continuing a recent boom despite economic jitters sown by the subprime-mortgage financial mess.

VCs tossed $7 billion at startups in the fourth quarter, a substantial 12 percent rise over the same quarter last year, according to data published by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Financial. Fourth-quarter funding slumped a bit compared to the average of $7.5 billion raised in each of the first three three quarters, although it’s difficult to say at this point whether that reflects early economic nervousness or simply a seasonal Q4 slowdown in the deal flow.

Overall 2007 investment in venture firms also rose 11 percent to $29.4 billion, a six-year high. (Of course, the 2007 figure is still dwarfed by the staggering $105.1 billion that flowed into Web and genomics startups in 2000 at the height of the bubble.)

Biotech companies led in overall financing, raising $1.29 billion in the quarter — a four percent rise over last year — which let the sector narrowly edge out software, which pulled in $1.27 billion. The two sectors are effectively tied at this point, and have traded the first-place slot back and forth since mid-2006.

Medical devices also had a strong quarter with $900.7 million in funding, nearly a 35 percent increase over last year. Two of the top ten financings in the quarter were the medical-device firms Evalve , a maker of heart-valve repair kits, and Zosano Pharma, which is developing needle-free patches that deliver drugs through the skin. These companies raised $60 million and $45 million, respectively. Biotech’s sole representative in the top ten deals was Ambit Biosciences, which received $49.3 million to support its development of new cancer drugs.

Cleantech funding almost doubled over the previous year, reaching $468.7 million in the quarter — apparently a record quarter. Major deals included EverPower Renewables, which raised $55 million for wind-power farms and Serious Materials, which drew $50 million for green building materials.

It’s notable that the funding directed to early stage companies has continued to edge up over the past six years, reaching $6.3 billion in 2007. That comes against a backdrop, however, in which expansion- or late-stage companies are absorbing an increasing portion of all funding. (See the second chart at the bottom of this post.)

For a closer look, check out these lists of the top ten deals in the fourth quarter and all of 2007 (Excel spreadsheet files). If you prefer, here is a slide show of Q4 and 2007 trends (PDF), and here are the raw numbers (Excel spreadsheet).

A competing set of VC-funding numbers from Dow Jones VentureOne and Ernst & Young aren’t due out until Tuesday, but I’ll poke through them then to see if there’s any news worth reporting. Meanwhile, here are some more graphics for your weekend enjoyment.