Week 06/05/2006 through 06/11/2006

Prepared by Capital Hunter analysts

Start-ups raised $427 million this period, as venture capital investment returned to normal from last period’s wackiness. California regained its crown as the most popular region, as 50% of this period’s venture capital was placed in companies domiciled in the Golden State, taking the top spot from Texas, which after raising $85 million last period only managed to raise $7 million this period. More importantly, however, money flowed into a multitude of different sectors, with less popular industries like business services, consumer services, computers & peripherals, media & entertainment and telecom receiving significant investment from both blue chip VC firms and private equity firms alike. In fact the business services sector received more funding than any other industry, with 21% of this period’s funding led by the $35 million Series C investment Global Market Insite received from Technology Crossover Ventures, FTVentures and Voyager Capital. Lots of travel related sites popped up this period as well, with no less than four companies, including Missouri-based Gusto, Homeaway.com, luxury travel site Luxury Link and San Francisco-based Viator receiving new equity financing, though none of them received more than $9 million. The biggest surprise, however, was the pathetic amount biotech companies received this period. Biotechnology companies only received $15.5 million, the smallest such amount since we started our Capital Hunter newsletter in 2003 and less than half of the largest biotech funding in a normal week. This is an anomaly as we expect biotechnology companies will be in our headlines next newsletter.

There were only two IPOs this period, and one of them is a blank check company looking to acquire banking assets. The other, LoopNet, is a venture backed online commercial real estate marketplace (similar in structure to eBay) that spiked 25% on its first day of trading as investors were clearly excited about owning a piece of a quality business, though the lack of momentum since its first day may signal investors’ nervousness about the real estate market amid more rate hikes by the Fed. Last year, the company generated $30.2 million in revenues and $18.9 million in net income and has increased both its revenues and net income over 60% from last year, numbers which should whet any investors’ appetite. In any case, here are the two IPO listings:

Community Bankers Acquisition AMEX:BTC.U priced at $60 million and is a blank check company looking to acquire operating assets in the banking sector.

LoopNet NASDAQ:LOOP priced at $72 million and is an operator of an online marketplace for commercial real estate.

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CapitalHunter.com was able to verify that $427 million of venture capital was invested in 45 U.S.-based companies during the past week. The average deal size was approximately 9.49 million. The amount of venture capital invested this period increased by 31% compared to last periods $327 million.

California was the largest recipient of venture capital funding this week. Twenty-one California companies raised $214.4 million in new equity financing, which accounted for 50% of the total venture capital invested this reporting period. The largest private venture financing in California was placed into the BlueArc Corporation . BlueArc raised $29 million in Series F funding and is a provider of network storage systems.

The business services sector raised the most venture capital this reporting period, with six companies raising $92.8 million in venture financing, which accounted for 21% of the venture capital this period. The largest private venture financing in the business services sector was Global Market Insite. Global Market Insite raised $35 million in Series C funding and is a provider of online polling services to businesses and consumers.

Start-ups raising their first stages of financing represented the largest share of the funding pie, as a solid 32% of all money invested this period went into such companies. The largest such financing was placed into NanoNexus. NanoNexus raised $27.73 million (technically this is not NanoNexus’ first round of funding; the company raised close to $65 million before undergoing this recap Series A round) and is a provider of advanced contactor and interconnect products for miniature devices.

The three largest venture deals this period are as follows:

The following fourteen companies and other unnamed investors funded the above mentioned top three venture capital investments for $91.73 million:

A total of 76 equity financings of private and public companies occurred during this reporting period. Each of the 76 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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