Week 01/08/2007 through 01/14/2007

Prepared by Capital Hunter analysts:

Well it seems we are finally back to normalcy, judging from the surge in weekly investment numbers this week. Venture capital rose to $587 million this period, the best week since late November when a record (since we started our letter in 2003) 56 companies received over $756 million, which was one of the highest weekly totals in 2006. Venture capital investment was led by the life sciences, with biotech and medical device companies accounting for 28% and 25%, respectively, of all capital raised this period. Information technology (software, semiconductors, IT services, etc.) related companies accounted for close to a third of all investment, while online services accounted for the rest. The biggest investment of the period was made by Technology Crossover Ventures, which committed $60 million to Automated Trading Desk, a provider of electronic trade execution services to financial institutions throughout the U.S. The $60 million investment received by Automated is the largest single investment in South Carolina that we can find in our database for the last three years, and the largest financial services investment since Integro, a New York City-based insurance brokerage, received $312 million from a consortium of financial companies in 2005. Major life science investments for this period include Pacific Biosciences of California, which raised $50 million in Series D funding in order to continue the development of their DNA gene sequencing technology, Calypso Medical Technologies, which raised $42.2 million in Series D funding to accelerate development of their tumor locating technology and diaDexus, which raised $40 million in Series E funding to continue development of their blood diagnostic tools. We expect that life science investment will continue to take up a larger share of venture capital over the coming year, with digital media gaining market share as well. Venture capital investment, which had its highest quarter in Q3 2006 (the PWC Moneytree Survey numbers state the Q2 surpassed Q3 due to discrepancies in data collection), with over $7.6 billion raised by over 500 companies, fell to $4.87 billion in Q4 2006, the lowest quarterly total since Q4 2005. Hopefully the Q3-Q4 drop isn’t a harbinger of things to come, but it remains to be seen whether 2007 will be as good as 2006. Stay tuned.

The IPO market, which surged at the end of the year, has been almost silent in January, with only a single offering to report. That company is Legacy Partners LP, an oil and natural gas limited partnership focused on properties in western Texas and southeast New Mexico. Hopefully we will have more to report in the coming weeks:

Legacy Partners LP NASDAQ:LGCY priced at $114 million and is an energy partnership focused on the acquisition and operation of gas fields in western Texas and southeast New Mexico.

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CapitalHunter.com was able to verify that $587 million of venture capital was invested in 37 U.S.-based companies during the past week. The average deal size was approximately 15.86 million. The amount of venture capital invested this period increased by 217% compared the last period’s $185 million.

California was the largest recipient of venture capital funding this week. Sixteen California companies raised $252.3 million in new equity financing, which accounted for 44% of the total venture capital invested this reporting period. The largest venture investment in California was placed into the earlier mentioned Pacific Biosciences of California.

The biotechnology sector raised the most venture capital this reporting period, with eight companies raising $165.5 million in venture financing. Biotechnology companies accounted for approximately 28% of the venture capital this period. The largest venture investment in the biotechnology sector was placed into the previously mentioned Pacific Biosciences of California.

Start-ups raising their late stages of funding represented the largest share of the funding pie, as 34% of all money invested this period went into such companies. The largest late stage funding was placed into the previous mentioned Pacific Biosciences of California.

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 $152.2 million:

A total of 63 equity financings of private and public companies occurred during this reporting period. Each of the 63 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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