Investors put $8.4 billion into 765 deals for U.S.-based venture companies during the third quarter of 2011, a 29 per cent increase in investment and 8 per cent increase in deals from the same period last year, says Dow Jones VentureSource. The median amount raised for a round of financing during the third quarter was $6 million, up from the $5 million median a year earlier.

“Venture investment rose in the third quarter, putting the industry on pace to near pre-recession investment levels by the end of the year,” said Jessica Canning, global research director for Dow Jones VentureSource. “While it’s unclear how long venture capitalists can continue at this pace given the weak fund-raising and difficult exit environments, the increase in deal activity, especially among early-stage start-ups, shows VCs are optimistic they will be able to support the next generation of start-ups.”

VCs Do More Early-Stage Deals: Seed- and first-rounds accounted for 42 per cent of deals and 21 per cent of capital invested during the third quarter, an uptick in deal activity from the year-ago period when early-stage rounds claimed 36 per cent of deals and 22 per cent of capital raised. Second rounds dropped from 23per cent of deal activity in the third quarter of 2010 to 20 per cent in the most recent quarter, while the proportion of capital garnered by these deals picked up slightly from 18 per cent last year to 19 per cent in the third quarter of 2011. Later-stage deals accounted for 37 per cent of the quarter’s deals and 58 per cent of total capital raised, a mild change from the same period last year when they accounted for 39 per cent of deals and 57 per cent of capital raised.

Capital Pours Into Consumer Internet Companies: Consumer Information Services, which includes online search, entertainment and social media companies, raised $1.3 billion for 104 deals during the third quarter, more than double the financing collected for 94 deals during the same period last year. Having collected $3.8 billion throughout the first three quarters of 2011, the sector is on pace to exceed the $4.2 billion companies raised in 2010.

“VCs are actively funding new Consumer Internet companies and pouring significant amounts of capital into later-stage deals, but second rounds are lagging,” said Scott Austin, editor of Dow Jones VentureWire. “If investors continue focusing on later-stage companies that would likely have exited years ago had market conditions been better, the hundreds of young Web start-ups that raised financing in the last two years will face intense competition for second rounds.”

Within the Consumer Internet sector, deal activity for young start-ups was strong as 57per cent of deals were seed- or first-rounds. While 30 per cent of deals went to later-stage companies, these companies accounted for $1 billion of the $1.3 billion companies in the sector collected. Thirteen percent of deals were second rounds.

Software Keeps Investments Flowing in IT: Companies in the Information Technology industry raised $2.1 billion for 227 deals in the third quarter, a 9 per cent increase in financing but 7 per cent drop in deal flow. The Software sector continued to be a bright spot for IT and collected the lion’s share of investment as 165 deals collected $1.3 billion. While investments in the Semiconductors and Hardware sectors declined, deal flow for Communications and Networking companies showed some strength as 25 deals raised $354 million, up from 22 deals that raised $246 million in the same period last year.

Investment in Enterprise and Energy Start-Ups Strong: While deal flow for Business and Financial Services companies rose 7 per cent, capital invested spiked 65 per cent as 139 deals collected $1.5 billion. The industry’s most active investment area was Business Support Services, which is driven by interest in marketing, advertising and data management companies. Business Support Services start-ups raised $1.2 billion for 104 deals in the most recent quarter.

The Energy and Utilities industry raised $635 million for 33 deals, an increase from the same period last year when 23 deals raised $381 million. As usual, Renewable Energy companies claimed almost all of the industry’s investment as 30 deals raised $621 million.

Medical Device Companies Raise More Than Biopharmaceuticals for First Time Since 1998: In the third quarter, Medical Device companies raised more venture financing than Biopharmaceutical companies for the first time since 1998. Sixty-eight Medical Device deals raised $857 million, a 15per cent rise in deal activity and 30 per cent increase in capital invested from the same period last year. In the Biopharmaceuticals sector, 78 deals raised $715 million, a drop in capital invested from the year-ago period when 71 deals raised $865 million.

“Although the Biopharmaceuticals sector lost its long-held place as the leader of the Healthcare industry, early-stage investment was strong, showing that investors are building a pipeline,” according to Canning. “In Medical Devices, investments were weighted toward the later-stage deals, which could be a result of concerns over the clarity of the FDA’s requirements weighing more heavily on device investors.”

Forty-two percent of Biopharmaceuticals deals went to early-stage companies and 26 per cent of Medical Device deals went to early-stage companies.

Medical IT companies maintained the strong investment numbers seen over the last year as 24 deals raised $207 million, not far from the same period last year when 24 deals collected $182 million.

Overall, the Healthcare industry raised $1.9 billion for 184 deals, an 11 per cent decline in capital invested and 9 per cent increase in deal flow.