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Venture Capital Bubble Watch: VC Has Its Biggest Quarter Since Dot-Com Boom

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U.S. venture capital had its biggest quarter in more than a decade, according to a new report. | Alamy

Not since the heady days of the dot-com boom have investors poured so much money into startups, according to an analysis of venture capital investments in the second quarter of 2012.

More than 800 companies received $8.1 billion of financing last quarter, financial analysis firm CB Insights said Monday. Funding jumped 37 percent from the first quarter and five percent from a year ago. The figures contradicted earlier concerns that Facebook's tumultuous IPO in May and broader economic uncertainty had caused venture capitalists to pull back.

In fact, the second quarter of 2012 marked the single largest quarter for venture capital dollars invested since the second quarter of 2001, CB Insights said.

In the Internet sector, last quarter's most well-funded category, median deal size increased at every stage of funding for the first time ever, suggesting that overall growth in the second quarter wasn't driven by the outsized effect of a few large deals.

On the heels of Facebook's $1 billion purchase of mobile photo-sharing app Instagram in April, the mobile sector saw an all-time quarterly high of 102 deals. Photo and video-related startups took home 29 percent of mobile funding dollars, the report found.

New York, which has seen something of a startup resurgence in recent years, beat out Massachusetts in overall VC deal volume for the second consecutive quarter, though Massachusetts led New York in terms of total VC dollars invested.

Both regions are fighting to be the second largest hot-bed for venture capital investments, behind California. The Golden State, for its part, was the only state among the three to increase its quarterly share of the nation's VC deals and VC dollars, netting 45 percent and 58 percent, respectively.

Unsurprisingly, Menlo Park, Calif.-based venture capital firm New Enterprise Associates led second quarter VC fundraising with $2.1 billion of the total $5.9 billion raised nationwide, according to the National Venture Capital Association. In comparison, U.S. venture capitalists raised $2.6 billion in the second quarter of 2011.

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