Venture capital activity in Austin bounces back in fourth quarter [Austin American-Statesman]

(Austin American-Statesman (TX) Via Acquire Media NewsEdge) Jan. 17--Venture capital activity in Austin rebounded in the fourth quarter from the previous quarter, thanks in part to three sizeable deals.

A total of $144.2 million was invested in 25 companies during the quarter, according to a survey by PricewaterhouseCoopers and the National Venture Capital Association.

That's a 217 percent increase over the $45.5 million raised by 14 companies in the third quarter.

"It was a nice bounce after a slow third quarter," said Eric Hornsten, managing partner at PricewaterhouseCooper's Austin office. "Hopefully it's a good sign that activity will continue into the first quarter. We've already seen some deals this year, which is also promising." For all of 2012, 82 companies raised $620.7 million, down 5 percent from the $653.1 million raised by 86 companies the year before.

Venture activity in Central Texas peaked during the height of the dot-com boom in 2000, when 178 area companies raised $2 billion.

The market regained strength in subsequent years but took another hit during the financial crisis that began in 2008. Over the past several years, the Austin market has recovered, with investors funding deals in areas where Austin has long been a player -- software, chip design and medical devices -- as well as newer markets including social media, mobile Web, cloud computing and data analytics.

Nationwide, activity also declined in 2012. Investors put $26.5 billion in 3,698 deals, a decrease of 10 percent in dollars and 6 percent in deals.

"General economic uncertainty continues to hinder capital investments, and venture capitalists are no different," said Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers.

As a result, a third fewer dollars went into early stage companies during the year, he said.

"As the number of new funds being raised continues to shrink, venture capitalists are becoming more discriminating with where they're willing to place new bets. At the same time, they're holding reserves to continue to support the companies already in their portfolio. Both those factors are taking a toll on the amount of capital available for young startups." Software was the single largest investment sector nationally in 2012, with dollars rising more than 10 percent over 2011 to $8.3 billion, which went into 1,266 deals. Meanwhile, most other industries saw double-digit decreases, including traditionally capital-intensive clean technology and life sciences sectors.

For the 12th consecutive quarter, the software industry was the sector closing the most deals in Austin. But the semiconductor sector brought in the most money in the fourth quarter, with two deals pulling in a total of $59 million.

Chip design company Calxeda was the largest deal of the quarter, receiving $50 million. In addition, uShip, which runs an online marketplace for shipping services, raised $18 million, and Mirna, a biotech research company, received $17.25 million.

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