Venture capitalists focus on later stages, but Silicon Valley still rules

Venture capital funding hasn’t hit the peaks it saw in early 2000, but it’s still going strong — particularly in Silicon Valley and for software companies.

Our analysis of venture funding from a variety of data sources revealed some interesting facts about last quarter’s deal flow.

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Last quarter, venture capital firms invested $6.95 billion into 876 deals, averaging $7.9 million per deal, with the vast majority of funding funneling out of Silicon Valley in the form of expansion and later-stage investments in the software and biotech industries.

Since 1995, the most active quarters to date based on total funds invested were Q1 of 2000, which saw $27 billion invested into 2,171 deals. That was followed by Q2 of 2000, with $26 billion invested and 2,135 deals announced; and Q3 of 2000, with $25B invested into 1,951 deals, according to data reported by Thomson Reuters.

Compared to the late ’90s, when VCs were pouring funding into a wide range of dot-com startups before the bubble burst in 2000, last quarter saw more conservative investment numbers. When VCs did decide to invest, it was typically in the form of expansion and later-stage investments.

10 most active VCs of Q3

1. New Enterprise Associates, Inc.: 27 deals, including CloudFlare, Inc. and GoodGuide, Inc.
2. Kleiner Perkins Caufield & Byers: 23 deals, including FindTheBest, Flipboard and Square.
3. First Found Capital: 22 deals, including Bitcasa and Turntable, fm.
4. Sequoia Capital: 16 deals, including Tumblr and MeLLmo
5. Intel Capital: 15 deals, including DynamicOps and Swrve New Media
6. U.S. Venture Partners: 15 deals, including Blekko, Inc. and Yammer, Inc.
7. Accel Partners: 14 deals, including Dropbox and Top10
8. InterWest Partners: 14 deals, including Cloud9 Analytics, Inc. and Quantance, Inc.
9. Google Ventures: 13 deals, including CustomMade and Ordr.in.
10. Rho Capital Partners, Inc.: 13 deals, including Clean Urban Energy, Inc. and Dashlane

You can also view this list as an interactive chart comparing the top 10 most-active VCs.

Top 10 most funded industries

1. Software $2B, 263 deals, 28.88% of total investments
2. Biotechnology $1.08B, 96,15.52% of total investments
3. Industrial/Energy $749M, 75, 10.77% of total investments
4. Medical Devices and Equipment $728M, 74, 10.48% of total investments
5. Media and Entertainment $682M, 112, 9.82% of total investments
6. IT Services $547M, 79, 7.87% of total investments
7. Consumer Products and Services $209M, 27 deals, 3.01% of total investments
8. Semiconductors, $183M, 26, 2.63% of total investments
9. Electronics/Instrumentation $152M, 20, 2.19% of total investments
10. Healthcare Services $152M, 11 deals, 2.19% of total investments

Last quarter’s investments were highly focused towards the software and biotech industries, though dollar investments into biotech companies actually fell 18 percent and the number of biotech deals fell by 20 percent as compared to the previous quarter.

Funding to software companies increased by 23 percent from the quarter prior, making it the most-funded industry with $2 billion invested. The software industry received nearly 29 percent of total investments, according to data provided by Thomson Reuters and reported by Price Waterhouse Coopers.

The biotech industry came in second, raking in $1.1 billion with 15.5 percent of total investments.

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The most active VC regions

1. Silicon Valley $2.7B, 273 deals, 38.38% of investments
2. NY Metro $891M, 103, 12.82% of investments
3. Texas $596M, 38, 8.57% of investments
4. New England $586M, 108, 8.42% of investments
5. LA/Orange County $401M, 51 deals, 5.77% of investments

The majority of funding, not surprisingly, came out of Silicon Valley, with the New York Metro area coming in second and Texas coming in third. But while investments coming out of Silicon Valley decreased by 13 percent last quarter, investments out of New York Metro and Texas saw increases of 33 percent and 113 percent respectively. You can view

New York Metro’s growth comes as Mayor Bloomberg announced earlier his belief that NYC’s Silicon Alley could soon replace California’s Silicon Valley in terms of high-tech startups and VC funding.  Despite predictions, last quarter Silicon Valley invested more than three times the amount New York Metro did, and more than the second, third, fourth and fifth highest investing regions combined, with a total of $2.7 billion into 273 deals.

Investments by stage of development

1. Expansion $2.5B, 260 deals, 35.92% of investments
2. Later Stage $2.3B, 186 deals, 33.37% of investments
3. Early Stage $2B, 341 deals, 28.14% of investments
4. Startup/Seed $179M, 89 deals, 2.57% of investments

Finally, the majority of last quarter’s deals were in the form of expansion and later stage investments, while startup funding made up only a fraction of total investments.

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Companies looking for investors can find and compare venture capital firms based on location, industry focus, investment stage and investment range on FindTheBest’s Venture Capital Firms comparison.

 Grace Nasri is the managing editor at FindTheBest.com, a data-driven comparison engine.