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reboundThree months ago, things were looking up for startups seeking venture capital. Now it seems that optimism was misplaced, according to the latest Moneytree Report from Pricewaterhouse Coopers and the National Venture Capital Association.

Venture funding has followed an unsteady path to recovery since the economy collapsed at the end of 2008. Venture rounds plummeted at the beginning of 2009, and though they’ve been climbing since then, the climb hasn’t been consistent. Investments fell in the first quarter of 2010, rose dramatically in Q2, and now they’ve fallen again.

So here’s the big number: During Q3 (July to September), venture firms invested a total of $4.8 billion in 780 deals, according to the report. That’s a 31 percent drop from the $6.9 million invested in Q2, and it didn’t even match the $5.8 billion invested during Q3 of 2009.

In a conference call discussing the numbers, Flybridge Capital Partners’ Michael Greeley suggested that Q2 may have been an “anomaly” and that the lower investment levels seen in Q1 and Q3 may be the new normal.

“Firms that are active are seeing quite healthy deal flow,” Greeley said, but the industry is consolidating and the number of active firms is falling.

Much of the unpredictability in venture capital can probably be attributed to cleantech. Since venture investment in the cleantech sector tends to be dominated by a few big deals, the amount invested varies widely from quarter to quarter. In Q3, cleantech investment declined 59 percent, to $625 million, from $1.5 billion in the previous quarter.

Still, other industries were down too. Biotech investments fell 32 percent. Internet investments fell 25 percent. The average deal size fell from $7.5 million to $6.2 million. And the number of early-stage deals fell from 454 to 358 (though as a percentage of overall deals, the number of early-stage financings remained the same).

The report was compiled using data from Thomson Reuters.

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