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Seed funding, the backbone of startups looking to get off the ground, grew last year according to the 2011 Internet/Digital Media and Software Industries Seed Financing Survey from Silicon Valley law firm Fenwick & West.

The firm released its second seed funding survey Thursday; the report tracked how much seed funding startups on the West Coast reported in 2010 and 2011. Data was gathered from 56 transactions in 2011 and 52 deals in 2010.

From 2010 to 2011, seeding funding transactions rose three percent, from 43 to 46 percent. However, of all companies surveyed by Fenwick and West in 2010 that received some sort of seed funding, only 45 percent went on to get venture capital funding. Only 12 percent received subsequent rounds of seed funding, while others were acquired, shut down, had no data available, or received no additional funding at all and are still up and running.

It’s great to see that funding is on the rise, but since less than half of the startups were able to secure venture capital, it shows that many startups aren’t moving forward and growing. On the flip side, the survey does point out that right now it is a “good environment for entrepreneurs” because investors are making faster decisions and startups that receive later rounds of funding are also receiving high valuations.

The survey also focused on the changes in convertible notes, the bonds that allow entrepreneurs to keep equity ownership, which grew in 2011. Startups rose a median $1 million in convertible note deals in 2011, up from $662,500 in 2010. In addition, the median valuation cap on convertible notes rose from $4.0 million in 2010 to $7.5 million in 2011.

Complete results of the survey can be found on Fenwick & West’s website.

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