VentureBeat

[Updated with VentureOne/Ernst & Young data, which shows investing increased significantly during the quarter]

Venture capitalists invested robustly during the third quarter, at or near record levels since 2001, according to two surveys released last night.

So all is OK on the investing side, even if the venture capital firms themselves are showing signs of pain. Friday, news spread of yet another venture capital firm that has put its fund-raising plans on hold, because investors found its results too mediocre to justify reinvesting. The firm, Sequel Venture Partners, of Boulder, Colo, invests in health care and technology.

Venture capitalists invested $7.1 billion during the third quarter, comfortably above levels of the same quarter last year, but showing a slight drop off from $7.3 million or so pace set in the first two quarters of this year, according to data published by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Financial.

This was followed by data from VentureOne and Ernst & Young, which shows a more robust investment picture. Venture capitalists invested $8.1 billion the third quarter, up from strongly from $7.5 billion in the second quarter, and $6.3 billion the same quarter a year ago, according that survey. It was the ninth straight quarterly increase, and the highest since 2001.

The quarter saw notable increases in both the clean-tech and internet companies.

Software and life sciences remain the most heavily funded sectors, with $1.11 billion and $1.9 billion, respectively, according to the NVCA/PwC/Thomson survey. Clean-tech, however continues to draw more interest, with $844 million in investment, or an 80 percent increase compared to the second quarter of the year. Three of the top five deals this quarter were in clean-tech.

The whopper was GreatPoint Energy, of Cambridge, Mass, which raised $100 million — one of the largest deals ever for the sector. It converts coal and biogass into clean natural gas (see our coverage of the deal, announced last month), and is backed big-name investors Kleiner Perkins, Khosla Ventures and Draper Fisher Jurvetson. The only company raising more than GreatPoint was Globus Medical, which raised $110 million.

Looking more closely at the NVCA/PwC/Thomson survey, here’s a full list of the top deals for the first quarter: Download Excel file.

Silicon Valley had the most deals, as usual. For a full list of all of the Silicon Valley company fundings, by company, investors, amounts, sector, location, and stage, see this detailed file (downloads Excel). Here’s a slide show of national trends (downloads pdf), and the detailed numbers are here (Excel file).

The year is still on pace to be the biggest year for venture investments since 2001.

Internet companies got $1.1 billion, a 17 percent increase in dollars over the second quarter. Media and entertainment was hot too, with $509 million compared to $464 million in the second quarter.

The dollar value of first time deals (companies receiving venture capital for the first time) was $ 1.7 billion, which remains high compared to last year. However, seed deals in the third quarter fell 15 percent to $1.4 billion compared to the second quarter.

The economy may croak from the credit crunch, but public offerings and acquisition deals are happening at the fastest pace in years. The fourth quarter is going to be monster.

Some 46 U.S. companies backed by venture capitalist registered during the third quarter to go public, according to research by Dow Jones VentureOne to be released tomorrow. Not all of them will go public within the next three months, but even if half of them do, that’s way more than in any quarter in recent memory.

If you VCs have been bullish already, these returns on their investments will make them even happier.

See the full report here (downloads Excel, a large file with several tabs) Note that only venture-backed companies are covered here in the research, which means some companies aren’t included. Since the Internet bubble burst, the most IPOs in a single quarter was 24, and that came in this year’s second quarter. Any more than that during the next three months, and the fourth quarter will be the biggest since the boom year of 2000.

Separately, the Dow Jones report shows that 90 venture-backed companies raised more than $10.5 billion in merger and acquisition transactions in the third quarter, a 31 percent increase over the same period last year and the highest quarterly amount since 2000.So far this year, $28.4 billion has been raised via M&A transactions and another $4.7 billion raised in public offerings, all but guaranteeing that this year will be the largest year in the U.S. for venture-backed liquidity —both in terms of IPOs and M&As— since the dot-com boom, said Jessica Canning, Director of Global Research for Dow Jones VentureOne. “Yes, after several years of uncertainty, the ‘venture capital rebound’ is officially over.”

Another interpretation: Maybe its the credit crunch that has everyone in a fluster. Do the deal now, or else….

It was a relatively sleep summer of IPOs, with only 11 companies going public. Still, even that was more active than last year’s nine IPOs.

More biopharmaceutical and medical device companies have filed to go public (22) than information technology companies (18). The number of clean-tech company IPOs in registration (two) looks quite anemic. Internet-Web 2.0 companies aren’t represented among the IPO candidates either.

Another factoid: The largest acquisition — the $812 million purchase of interactive advertising firm Right Media by Yahoo —was more than all the capital raised via IPO during the third quarter. The largest IPO of the quarter belonged to medical software company Athenahealth, which raised $90 million.

The report also shows that the time between initial venture investment and M&A-IPO also reached its highest level ever in the third quarter at seven years for M&As, and 8.5 years for IPOs.

The median valuation of U.S. private companies dropped from the six-year high reached late last year, but remains higher than a year ago, according to the latest quarterly valuation report from Dow Jones VentureOne.

Valuations on venture-backed companies are negotiated by venture capitalists and entrepreneurs. If valuations head lower, that is not great for companies because it means they give away a larger stake of their company for the dollars they get from venture capitalists.

At $18.5 million for the first quarter of 2007, the median pre-investment valuation is modestly above the $16.4 million median recorded in the first quarter of 2006, but slightly below the $20 million median it topped out at in the fourth quarter of last year. See the full data here (downloads excel file).

This comes after a report last week by law firm Fenwick & West showing that a greater percentage of companies negotiated higher valuations in follow-on rounds than in any other quarter on record (79 percent of SF Bay Area companies negotiated up rounds vs. 9 percent down). This suggests the investment climate is still hot.

The two reports are compatible. Overall valuations can decline slightly, even as a greater percentage of companies negotiate higher valuations than their previous rounds (its just that the overall levels of those valuations are not as high as the quarter before). Confused? Well, put simply, we’ll have to wait another quarter or two to see if things are really cooling down.

Biopharmaceutical companies posted the most significant increase in values, according to the Dow Jones report, with the median valuation rising to $28 million from $15 million in the first quarter of 2006. The healthcare industry overall, however, was down with the median valuation dropping to $22.1 million in the current quarter from $27 million a year ago.

Information technology company valuations held steady from a year ago, at a median $15.4 million, although each segment within the IT category posted some declines during the most recent quarter, according to the data.

Finally, it’s worth noting that later-round valuations, which fell in the fourth quarter, rose in the most recent quarter — reflecting the heavy action right now in the M&A and IPO markets, where more mature companies are getting snapped up by other companies or going public. The $41 million median price set in all companies raising a third or later round was the highest since the second quarter of 2001, when it was $42.9 million.

[Disclosure: Fenwick & West is a sponsor of VentureBeat]