Week 01/09/2006 through 01/15/2006

Prepared by Capital Hunter analysts

Venture capital activity, as measured in dollars, declined this reporting period, as only $356 million was invested this week, down from the $488 million invested last week. However, the number of companies that received funding rose to 42, up from only 30 a week ago. In addition, 19 of these 42 companies raised their first round of institutional investment and accounted for over 31% of the total venture capital raised this reporting period, which was higher than any other funding round save second round investments. While one week hardly signifies a trend, it is encouraging to see early-stage start-ups receiving more interest from venture capitalists and private equity firms. Perhaps all of the gloomy forecasts for the future of the U.S. economy may not come to fruition after all.

There was only one initial public offering this week, as companies are uncertain about the direction of the stock market and are using a wait-and-see approach before making any moves. The one company brave enough to list is listed below:

Lin Energy priced at $246.75 million on the NASDAQ and is an independent natural gas company acquiring and developing natural gas properties in the Appalachian Basin.

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CapitalHunter.com was able to verify that $356 million of venture capital was invested in 42 U.S.-based companies during the past two weeks. The average deal size was approximately 8.45 million. The amount of venture capital invested this period decreased by 27% compared to last periods $488 million.

California was the largest recipient of venture capital funding this week, but funding was more geographically dispersed than normal. Ten California companies raised $85.8 million in new equity financing, which accounted for 23% of the total venture capital invested this reporting period. The largest private venture financing in California was placed into Zonare Medical Systems. Zonare Medical Systems raised $30 million in Series F financing and is a designer and developer of compact ultrasound devices.

The biotechnology sector edged out the software sector for the most total venture capital this reporting period, with seven biotech companies raising $77.9 million in venture financing, which accounted for 23% of the venture capital this period. Software accounted for 21% of this week’s funding. The largest private venture financing in the biotechnology sector this period went into Achillion Pharmaceuticals. Achillion Pharmaceuticals raised $21 million in Series C funding and is currently developing small molecule anti-infective agents used in the treatment of HIV, hepatitis B and C, and herpes.

Start-ups raising their second institutional round of financing represented the largest share of the funding pie, as 35% of all money invested this period went into such companies. The largest private venture financing in the Series B round was placed into ColdWatt. ColdWatt raised $16 million in new equity financing and is a provider of power solutions used in high-end electronics applications.

The three largest venture deals this period are as follows:

The following eighteen companies and other unnamed investors funded the above mentioned top three venture capital investments for $67 million:

A total of 84 equity financings of private and public companies occurred during this reporting period. Each of the 84 equity financings are profiled in a weekly (in this case biweekly) report which include venture financings, private placements, secondary offerings, PIPE’s, and IPO’s.

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