Venture investors bet more on media

Venture capitalists poured larger amounts of money into companies that develop technology to distribute movies, television shows, and other content in the first quarter of this year, but turned cool to the life sciences industry, according to the latest industry statistics.

According to the MoneyTree Report from PricewaterhouseCoopers, the National Venture Capital Association and Thomson Financial, venture investments increased 12 percent in the first three months of 2006, compared to the prior year's period, to $5.6 billion. However, it is a tad less in total than what investors directed into companies at the end of 2005.

In New England, meanwhile, venture funding to companies increased by more than 35 percent, to $453.9 million.

Of the first quarter, 2006 total, $396 million went to media and entertainment companies, a 79.7 percent increase over the last quarter of 2005, and the largest quarterly infusion of funding for the sector since 2001.

Meanwhile, funding for companies in the life sciences sector -- biotechnology and medical devices -- dropped 24 percent.

''The big jump came in the media and entertainment industry," said Tracy T. Lefteroff, global managing director at PricewaterhouseCoopers. Investors, he said, are enamored by the prospects of companies like SlingMedia Inc. and MovieBeam Inc., which take advantage of new hardware to distribute video and other content to consumers.

Still, media and entertainment remain overall a small part of a virtually unchanged venture capital landscape. The 761 deals in the first quarter were barely beneath the 781 venture deals in the last quarter of 2005, when investors backed entrepreneurs with $5.7 billion in new capital.

Even with the cool-off, life sciences remains a dominant industry for venture investors, as does software. Software companies raked in $1.2 billion in investments nationwide while biotechnology firms pulled down $808 million in the first quarter, making them the top two categories.

Moreover, Lefteroff said the steep decline in investments for life sciences companies was most likely a cyclical blip: biotech and medical-device firms participated in several important conventions early this year and venture investors were likely shopping those events for potential deals.

''A lot of major industry conferences happen in the first quarter of the year and it takes the venture capital industry and their funds a while to get the deal flow back up," he said.

What remains a concern, though, was the high number of more established companies that got funding, a sign the firms are having trouble going public through an initial stock offering. The number of late-stage companies that got funding in the first quarter jumped 25 percent, to 253 from 202 in the previous period.

''We're not seeing particularly great exit opportunities for a lot of these companies, so these companies are coming into the later stage perhaps weighing their options, the timing of going public later, or perhaps reconsidering other options." said John S. Taylor, research and financial affairs executive at the National Venture Capital Association.

Two Cambridge companies were among the five largest venture capital deals in the country in the first quarter. ITA Software Inc., which makes airfare-pricing software, got $100 million from a group of five venture firms and Microbia Inc., a biotech firm that works with drug manufacturers landed $75 million from a group of six investors.

Those deals topped the list of New England's largest funding rounds in the first quarter. Rounding out the top five in the region were Insulet Corp. of Bedford, a medical devices company that raised $50 million, Woburn semiconductor maker Luminus Devices, which raised $33.6 million, and AeroSat Corp. of Temple, N.H.,, which makes wireless communications equipment and raised $31 million.

Keith Reed can be reached at reed@globe.com. MORE ON VENTURE INVESTING

For more detailed information on venture investing trends go to boston.com/business.