Venture funding inches up

Financing in New England, the nation’s second-largest magnet for venture capital after California’s Silicon Valley, rose for the second-straight quarter in the three months ended Sept. 30.

“It’s a good sign,’’ said Kevin Shaw, a partner in charge of the Cambridge entrepreneurial center for the PricewaterhouseCoopers accounting firm. “Anything going up in this economy is a good sign.’’

But while entrepreneurial companies raised more money in the third quarter than the second, led by biotechnology and clean tech companies, quarterly venture funding totals in the nation and the region were lower than in last year’s third quarter.

“The industry is in a different size band now than it was a year ago or two years ago,’’ said John S. Taylor, vice president of research for the National Venture Capital Association.

MoneyTree’s report showed venture funding in the United States climbed to $4.8 billion July through September, a 16.8 percent increase from the previous three months.

Last quarter’s outlay was 37.9 percent below that of the 2008 third quarter.

Third-quarter investments in New England totaled $558.8 million, 14.7 percent higher than the second quarter but 34.5 percent lower than last year’s third quarter, according to the report.

MoneyTree, a partnership of PricewaterhouseCoopers and the venture trade association, uses data from research firm Thomson Reuters.

Even as start-ups across the country raised more money in the most recent quarter, the number of deals fell 3 percent to 637 from 657 in the April-to-June period, with venture capital firms committing more funds to companies already in their portfolios. First-time financings tumbled to $600 million, the lowest level since the venture industry began tracking investment data in the mid-1990s.

“We are definitely seeing the most experienced entrepreneurs get funded, and the most experienced teams,’’ said Amir Nashat, a general partner focusing on life sciences at Polaris Venture Partners in Waltham. “There’s a flight toward experience.’’

Among sectors nationwide, biotechnology companies drew the most money last quarter - $905 million. Energy and industrial start-ups came in second with $864 million, surpassing computer software companies - traditionally the first- or second-largest funding recipients - which attracted $622 million.

Rounding out the sectors were medical-device companies, which drew $617 million, and media and entertainment businesses, which attracted $446 million on the strength of a $100 million financing round for San Francisco blog services provider Twitter Inc.

The largest deal last quarter was a $286 million funding round for Solyndra Inc., a Fremont, Calif., company that designs and makes solar energy technology, helping to propel the energy and industrial sector. Four of the top 10 national deals in the quarter went to energy and industrial firms.

But in New England, biotechnology dominated, with the top four funding deals - and seven of the 10 biggest - going to biotech start-ups. The region’s largest deal during the quarter was the $32 million raised by Epizyme Inc., a Cambridge company using gene regulation to develop drugs to treat cancer and other diseases.

“Biotech is taking the lead here,’’ said PricewaterhouseCoopers’s Shaw. “It’s not surprising, given the kind of companies we have here, the universities, and the hospitals.’’

Venture capitalists yesterday said they expect investing will continue to rise in the fourth quarter and next year, largely because of the improving financial markets and the opening of the window for initial public offerings. IPOs should continue in the coming quarters unless the newly public companies stumble, they said.

“If too many do that, it kills the market for IPOs,’’ said Jim Feuille, general partner at Crosslink Capital in San Francisco.

Robert Weisman can be reached at weisman@globe.com.