The Entrepreneur’s Guide To Venture Capital – Part 7

Today I’ll continue with my series on the Entrepreneur’s Guide To Venture Capital.

Investment By Industry

As I’ve mentioned in previous posts from this series, venture capitalists look for high growth companies where they can earn a substantial return on their investment in a short amount of time.

This generally leads VCs to invest their money into companies that are in explosive and constantly changing industries. It’s not impossible to grow quickly and make substantial gains in an established industry but it’s more difficult.

As mentioned in Part 6 of the series, in the third quarter of 2008, venture capitalists invested $7.1 billion into 907 different deals. Today we’ll look at where they money is going by industry.

In terms of dollars invested, the Biotechnology industry came out at the number one position with $1.35 billion invested. Software was a close second at $1.34 billion. The Industrial / Energy industry came out in third position with $1.2 billion and in fourth spot was Internet-specific companies receiving $1.1 billion. Rounding out the top five was Telecommunications with $323 million.

In terms of number of deals done, the Software industry is the clear winner with 214 companies receiving funding. Internet companies came in second with 194 deals, Biotechnology was third with 114, Industrial / Energy was fourth with 96 deals, and Telecommunications was again fifth with 45 deals.

What’s interesting is that Internet companies were number four on the money list but number two on the number of deals list showing that VCs don’t think it takes a lot of money to start an Internet company and that they have an appetite to invest in online business models.

Matthew Toren

Matthew Toren is an Award Winning Author, Serial Entrepreneur, and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Adam. Matthew is co-author of the newly released book:Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.