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Venture Capital Hits Highest Level Since Dot-Com Bubble

A new report finds a surge in mobile deals, a drop in health care, and a shift from Massachusetts to New York.

Apparently the string of recent tech IPO disappointments hasn't put the brakes on VC firms.

Venture capital activity is reaching a high not seen in more than a decade, with Internet firms setting the pace, according to a new report set for publication early Tuesday.

New research from private equity research firm CB Insights finds that 812 companies received $8.1 billion in financing for the second quarter of 2012. That marks the highest quarter, in terms of both number of deals and financing dollars, since the dot-com heyday of the early 2000s, said CB Insights CEO and co-founder Anand Sanwal.

Funding increased 37% from the first quarter, while the number of deals increased 3%. Year-over-year growth was 5% and 4%, for dollars and deals respectively.

The Internet sector remained the hottest sector overall, accounting for 46% of VC deals. But the firm found a decline in social Web investments: "VC is about finding what's next," Sanwal said in an email. "So while there is still a lot of opportunity in social, VCs are trying to understand that next big opportunity."

That may explain the surge in mobile funding, which hit 102 deals--an all-time high for the sector. (On the losing side was the health care sector, where the number of investments hit a five-quarter low.)

Seed-round venture capital hit an all-time high in the second quarter, accounting for 31% of all Internet and mobile sector deals, and approximately 20% of all deals.

The study also found that New York seems to be surpassing Massachusetts as the most significant tech hub outside of Silicon Valley. For the second consecutive quarter, more VC deals were executed in New York than Massachusetts. However, Massachusetts retain the No. 2 position in terms of dollars of funding.

California remains the runaway leader on both fronts, being home to 45% of all deals and 58% of all dollars funded.

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Last updated: Jul 16, 2012

JOHN MCDERMOTT | Staff Writer

John McDermott is a business and culture reporter whose work has appeared in the Chicago Tribune and Playboy and on AOL.com. He recently moved from Chicago to Brooklyn, New York, to work for Inc.com.




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