U.S. venture capitalists opened their wallets a bit wider in the last quarter of 2011 than a year ago, but they're not quite as flush as their largesse would indicate.
The industry invested some $6.57 billion in the nation's startups, up 19 percent from the $5.52 billion invested a year earlier, according to the National Venture Capital Association and Pricewaterhouse Coopers, using data from Thomson Reuters.
But the total was almost $1 billion more than the $5.6 billion venture capitalists raised last quarter from their own investors - university endowments, pension funds, and the like. The mismatch reinforced a trend in recent years where venture capitalists generally spend more each quarter than they raise - a risky, perhaps unsustainable trend, industry players have warned.
The venture-capital funds invested the funds in 844 companies, down from 861 companies a year ago, translating into an average deal size of $7.8 million compared to $6.4 million a year ago.
Concentrating more cash among a smaller number of companies signals a couple of different trends depending on the industry, said National Venture Capital Association President Mark Heesen.
For sectors such as the life sciences and clean technology, 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, he said in a statement.
In other sectors such as software and media, companies are reaching higher valuations than in the past, making it more expensive to invest in them.
Despite the high price tag, software was the leading investment category for both the fourth quarter and full year 2011. Biotechnology ran second for the quarter and year, followed by the industrial/energy category.
Top deals for the quarter included $250 million to software company Dropbox and $200 million to electric-car infrastructure company Better Place.
For the full year, venture capitalists invested $28.4 billion, up 22 percent from $23.26 billion invested the year before.
(Reporting by Sarah McBride; Editing by Gary Hill)