December Surge of Internet Deals Carries Venture Capital to Two-Year High

A wave of Internet deals helped venture funding during the fourth quarter of 2010 reach a two-year high-water mark in both the number of deals and capital invested, according to CB Insights, a New York information and data services company tracking the innovation economy.

Venture capital firms poured a total of more than $6.5 billion into 735 deals during the last three months of 2010, according to CB Insights’ Q4 2010 Venture Capital Activity Report. That represents an 18 percent increase in capital invested and a 6.9 percent rise in number of deals, compared with the $5.5 billion and 687 deals counted during the fourth quarter of 2009.

Annual venture funding in 2010 amounted to $23.7 billion invested in 2,792 deals, a 14 percent gain in funding and 13 percent increase in deals over 2009, when CB Insights found a total of $20.8 billion invested in 2,461 deals for the year.

Capital invested during the fourth quarter was boosted, though, by four mega Internet deals that closed in December. The four deals together accounted for $965 million of the $1 billion gain over the $5.5 billion that was invested during same quarter in 2009.

CB Insights included $500 million of the $950 million Groupon deal in the fourth quarter of 2010 (the Groupon deal was announced in December but closed in January), according to CB Insights co-founder Anand Sanwal. Other December deals that helped buoy the numbers were Kleiner Perkins’ $200 million investment in Twitter, Amazon’s $175 million funding for LivingSocial, and a $90 million venture investment in Whale Shark Media, which was largely used to acquire Australia’s RetailMeNot.

With four deals accounting for such a big share of the capital invested, it’s difficult to extract meaningful trends from the investment increase seen in the quarterly data. But as my Xconomy colleague Wade Roush says, it’s unwise to write off mega deals like Groupon and Twitter altogether. They’re still a sign that VCs are willing to invest heavily in some venture-backed companies.

“There is more optimism than we’ve observed in

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Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.