I have been doing some search on the Venture capital stats from National Venture Capital Association and here are the findings. Contrary to some reports, the stats show that the Silicon Valley venture system is still healthy – investing majority of the money in early stage companies, showing risk appetite. The number of deals is just in the 2002-2005 levels, lower than 1996 level and way lower than 1999. There is very little resemblance to the dot com era in any of these statistics and the investments in the last couple of years – in number of deals, deal sizes are close to the long term average. Also in the past 5 years there is a convergence in the deal size – average amount invested per deal is constant at $7 million though in the heady days of 1999-2000 it was 40% more. Based on these stats, I conclude there is still not a bubble in venture funding in the valley. The original data is here.

1.Though the number of deals has increased from the bubble burst in 2002, the number of investments done is half the 1999 levels and slightly less than even pre-dotcom bubble in 1996. Also the number of early stage investments – the bread and butter of VCs – show little increase from the depth of dotcom crisis in 2002 although seed investments show a marked improvement. (For 2011, we have only first 3 quarters data and I did a simple projection to fill the fourth quarter).

2. The average amount invested per deal has been close to $7 million in the past 10 years in contrast to how it shot up during the dot com bubble – 1998-2001. There appears correlation to be a correlation in deal sizes and economic growth. Though there was a slight increase in deal size this year bouncing from the 2009 nadir, it is possible that it is skewed by couple of big ticket investments in Facebook, Groupon and even then it is quite close to the long term mean.

3. VC investments in the first 3 quarters of 2011 show a clear preference for software – of the $21 billion invested across all sectors, software got almost a quarter. The next hottest is Biotech, followed by energy, medical devices and media. Though there are preferences, the investments are still well spread across sectors.

4. The investments – both in number deals and amount invested – is primarily in early stage companies. Seed stage comes second in the number of investments, though in terms of amount invested it is expectedly overtaken by expansion and later stage ventures.