Venture Capitalists Fourth Quarter Spending Exceeds Raised Funds

In 2011’s fourth quarter, venture capitalists spent $6.57 billion in startups, a 19 percent rise from the previous year’s $5.52 billion. The increase could be perceived as positive sign but there was also a negative found in the quarter’s activities.

According to Reuters, the quarter’s total spending came in almost $1 billion more than the $5.6 billion raised by the venture capitalists in the fourth quarter from investors such as university endowments and pension funds. With the discrepancy, it supports the trend that venture capitalists will usually spend more money every quarter than they what they raise.

Another fourth quarter stat released was venture-capital firms invested funds in 844 companies, down from the previous year’s 861. An average deal came in at $7.8 million versus 2010’s $6.4 million.

So what does the greater cash, less companies trend mean?

According to National Venture Capital Association President Mark Heesen, it depends on the industry. He explained that with the life sciences and clean technology sector,”the concentration indicates the challenging exit market which requires venture capitalists to fuel their existing portfolios longer and at greater investment levels than in the past.”

For 2011, including fourth quarter stats, software was the leading investment category even with its higher costs to do so. Biotechnology and industrial/energy rounded out the top three, respectively.

In the fourth quarter, top deals included a $250 million funding to Dropbox and $200 million to Better Place.