US start-up funding in decline, but local outlook not so grim

A new report reveals start-up funding in the United States is in decline, falling by 12% in the April-June period, but a local body says the fundraising climate in Australia isn’t quite as tough.

The statistic comes from a MoneyTree study, conducted by PricewaterhouseCoopers and the National Venture Capital Association, and based on data from Thomson Reuters.

The report reveals start-up investments fell to $7 billion in the second quarter, down from $8 billion in the same period a year earlier.

Meanwhile, seed-stage companies received less than half of the funding that they did a year ago, with $199.4 million going into 63 deals. That’s down from $422.8 million going into 130 deals.

The companies getting funded were mainly in the software, internet, industrial and energy sectors. There were 898 deals completed during the quarter, down 15% from 1,057 a year earlier.

Internet companies received the second-highest level of investment in more than a decade, with $1.8 billion going into 261 deals, while investments in the life sciences are in decline.

In the second quarter, venture capital firms poured $696.8 million into biotech start-ups, less than half of the $1.44 billion they invested a year earlier.

Meanwhile, VC fundraising in Australia declined by 24% in the 2011 financial year to $120 million.

This statistic comes from the 2011 Yearbook of the Australian Private Equity & Venture Capital Association.

According to the report, 2011 saw an increased appetite among international VCs and investors for high-growth Australian tech companies.

“Notable deals included Accel Partners’ investments in software development platform provider Atlassian, crowdsource website 99designs, and its investment in online foreign exchange service provider OzForex,” the report said.

“Other emerging Australian companies receiving international funding included Ozsale, Spreets and Catch of the Day.”

But unlike the US, last year saw the life sciences sector feature prominently in investment activity, accounting for almost half of the total amount invested.

“Life sciences companies received 58% of all VC amounts invested, followed by computer and consumer electronics at 20%, and communications at 14%,” the report said.

Companies in the expansion/growth stage accounted for more than one fourth of total companies receiving investments, and 8% of the total amount invested in 2011, down from 20% in 2010.

Seed, start-up, early and late-stage VC investments received 3% of the total capital invested in 2011, down from 5% the previous year.

However, seed stage investment saw a 128% increase year-on-year to $4.24 million.