Go Where the Money is

If you're still in two minds about whether to push ahead with a clean tech or healthcare project, take comfort from the latest VC investment figures. Funds are definitely out there to back good ideas - and record amounts of cash are now being poured into some sectors.

Data released by Dow Jones VentureOne over the weekend indicates that US VC firms pumped $590m into energy investments in the third quarter of 2007, a leap of 28 per cent over the same period last year. Investment in advanced specialty materials and chemicals companies - another substantial subset of the clean tech equation - doubled from the previous year to $277m. UK investment trends don't slavishly follow the US, of course, but with Silicon Valley emerging as a leader in clean technologies, the figures give some indication about where investment preferences might swing in the UK and elsewhere going forward.

Alongside green concerns, of course, healthcare remains a big talking point in the US and has also proved to be fertile ground for entrepreneurs. Earlier this month, the first Baby Boomer, a retired teacher, applied for social security - and as VentureOne points out, there are 76m other Boomers waiting to follow suit. Aside from the impact on social security funds, all of these new retirees are going to need medical care - which helps explain why overall investment in the healthcare sector grew four per cent. The medical devices sector in particular continues to grow strongly - while the number of actual deals fell, total investment climbed 19 per cent to $830m, taking the sector to record annual figures with just three quarters gone.

Elsewhere, traditional information technology investment slipped a little, with ten per cent fewer deals and five per cent less overall investment in the third quarter. It remains, however, the largest VC investment area overall with $3.77bn of investment. Not surprisingly, the information services category - which includes Web 2.0 companies - now accounts for around a quarter of overall IT funds. Significantly, some 60 per cent of IT deals went to second and later round companies, a trend that was borne out across the whole VC arena. While the level of early-stage investment remained steady, this later-stage focus helped push median deal sizes to a new record of $7.92m.

Finally, if you ever decide to seek out US investment, bear in mind that just like house prices, location is everything. New England and New York both saw healthy growth on the East Coast - but it's hard to argue with California, which alone accounts for a staggering 44 per cent of all US VC activity in the third quarter. While the Bay Area's share fell slightly, Southern California saw its biggest deal volume since 2001 - suggesting that we'll have to wait a while before any other state makes a serious challenge for the number one slot.

By Keith Rodgers

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