Venture capital investments in emerging sectors continue to rise:

• Alternative energy saw deal flow more than triple from a year ago. alternative energy and energy conservation products attracted   14 deals and $110.2 million invested, about 2 1/2 times more than was invested here a year ago.
• Web 2.0, Internet-dominated information services segment, saw 41% more deals than in the third quarter of 2005.

Eearly stage financings are also on the rise, likely driven by the more than $35 billion in new funds raised over the past 18 months. In the third quarter, 38% of all venture capital rounds went to seed- and first-round deals, the highest allocation percentage this year. In fact, this was the first quarter of this year that more seed and first round deals were completed than later round deals. In addition, the $1.49 billion invested in early stage financings was the most capital invested to these rounds in a single quarter this year and was 13% higher than similar round investments last year. Early stage investment in healthcare were 44% of the rounds while in the information technology segment 32% of the rounds were early stage. 

By industry:

Capital investment in healthcare companies increased 3% over the same quarter a year ago, reaching $2.05 billion in 159 rounds. The biopharmaceutical segment was the major focus, with 72 deals and $1.27 billion invested, an increase of seven deals and 9% more capital than last year. In addition, the median size of a biopharmaceutical deal was $14 million in the third quarter, the highest median on record. The median size of an overall healthcare deal was $7.5 million, down slightly from $8 million a year ago.

Overall deal count in information technology (IT) was up by nine deals to 365 and investment increased 4% over a year ago to $3.56 billion. Within the category, investment in software companies rose 8% to $1.47 billion from a year ago, although 28 fewer software deals were completed. The information services segment posted 82 deals (a 41% increase in deal flow) although capital declined 9%. In communications, $861.6 million was invested, a 10% increase, plus there were six more communications deals completed. The largest deal of the quarter was an IT deal -- the $132 million later stage round in telecommunications semiconductor company Cortina Systems of Sunnyvale, Calif. The median size of an IT deal was $7 million, up from $6.6 million a year ago.

By region, leading markets for venture capital investing:

• San Francisco Bay area: 207 deals and $2.45 billion invested, an 8% increase in capital. 
• Southern California: Investments up 16%, to $710.6 million, and deal flow was up by 3 deals. 
• The New York metropolitan region: 8 more deals and capital investment up by 78%. 
• Texas: investment was up 20% as a result of 4 more deals. 
• In New England: 5 more deals were completed than a year ago, but capital was down 19% to $617.4 million.