Corporate venture capital investments are carving out an increasingly wider swath in the venture capital world.

But with only a tenth of total venture investments coming from big business, corporate activity has yet to fill the shadow of the dot-com era.

According to the MoneyTree Report, released Thursday by PricewaterhouseCoopers and the National Venture Capital Association, corporate venture activity has been steadily increasing. The trend started in 4Q 2005, when the quarter’s 156 deals—6.8 percent of the venture scene—represented $386.5 million of investment activity.

Since then, the numbers have been incrementally up across the board for venture involvement. And as of the second quarter of 2006, they reached levels that haven’t existed since the bubble began to break in the first quarter of 2002.

Four-Year High

Deals featuring corporate investments were at a four-year high of 195, a 21.9 percent increase over the same time period last year.

“I think it’s taken them almost six years to get back into the game,” said Tracy T. Lefteroff, global managing partner at PricewaterhouseCoopers. “I don’t think you’re going to see huge jumps, but the gradual increases we’re seeing are certainly indicative of a return to interest in investing in these young technology companies.”

Where the deals have been going, the money’s been following. Second-quarter corporate venture investments captured 9.2 percent of the entire venture capital market, or $602.5 million.

That represents an increase of 3.4 percent over 2Q 2005, and a financial upswing of $236.7 million in corporate venture investments—or 64.7 percent growth.

Regardless of the source, the software sector enjoyed the most venture capital involvement in terms of deals completed in the first half of 2006, representing 26.6 percent of all venture capital deals in total and 23.0 percent of all corporate venture investments.

The telecommunications sector carried the most financial interest in the corporate venture capital world, receiving 15.3 percent—$159 million—of the year’s investment dollars so far.

“If you look across the board, corporate profits in America have been up,” said Mr. Lefteroff. “So having that excess cash and profitability gives them courage and makes them less risk-adverse to invest in these sorts of companies.”

Contact the writer:DMurphy@RedHerring.com

del.icio.us

Digg this

Slash it