VC funding rises 8% in N.E.

Venture capital funding, the lifeblood of the high-tech and life-sciences industries, was up slightly nationwide during the second quarter but rose 8 percent for New England firms.

Venture capitalists invested $708 million in New England companies during the quarter, up from $658 million for the same period a year earlier, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association.

The firms compiled the report, issued yesterday, based on data by Thomson Financial.

Nationwide, venture capitalists invested the highest dollar amount in the most deals since early 2002, according to the report, and the life-sciences sector was a big part of that story.

For all sectors, venture investing nationwide grew 1 percent, to $6.35 billion, and there were 856 deals, the report said. Comparable figures for the same period in 2005 were $6.3 billion in 804 deals.

``It appears as if the venture capital industry is slowly ratcheting up investment levels for the first time in four years," said Mark Heesen, president of the National Venture Capital Association.

``Almost a third of venture capital invested during the quarter went to life-sciences companies," added Tracy Lefteroff , global managing partner of the venture capital practice at PricewaterhouseCoopers.

Massachusetts, with its concentration of universities and medical institutions, is fertile ground for the life-sciences industry, which is made up of biotech and medical-device companies. Biotechnology is estimated to account for about 30,000 jobs in the Bay State.

Nationally, second-quarter investment in the life-sciences sector rose 14 percent to $1.75 billion on a year-to-year basis.

``This is a strong bullish signal that the biotech industry is here to stay," said Gilbert H. Kliman , a general partner at InterWest Partners , a venture capital firm in California's Silicon Valley.

New England accounted for 14 percent, or $251 million, of the venture money invested nationwide in life-sciences companies during the second quarter. Venture funding went to 24 New England life-sciences companies during the period. For the year-earlier quarter, 20 companies in the region received $175 million in venture-backed funding, according to PricewaterhouseCoopers.

Nationwide, the number of deals in biotech companies was 112, a record. The previous mark for biotech deals was 102, set in the fourth quarter of 2004. A year ago, there were 94 such deals.

``This quarter's record-breaking number of biotech companies receiving funding makes it abundantly clear that venture capitalists recognize the long-term viability of the industry," said Lefteroff, of PricewaterhouseCoopers.

According to the report, venture funding for software companies declined from the previous quarter, with $1.3 billion going into 231 deals.

Compared with this year's first quarter, the industrial-energy sector showed a 62-percent increase, with $417 million going into 46 companies, a five-year high. Much of the increase can be attributed to alternative energy deals, the report said.

Internet companies received $916 million in venture funding, basically flat with funding in the first quarter; funding of the telecommunications sector, which had a drop in the first quarter, was flat, the report said.

Commenting on overall venture funding in the second quarter, Heesen said, ``We are encouraged by the upswing in the number of seed and early-stage deals -- these companies represent the future of our industry."

For the second quarter, Silicon Valley received $2.25 billion, the most for any region.

Chris Reidy can be reached at reidy@globe.com.