Facebook captures largest IT deal of quarter

The IT industry raised almost $2 billion in venture capital in the third quarter, regaining its position as the top money-grabber, Dow Jones VentureSource says in a new report. But overall, IT investment has hit its lowest point in 12 years.

Web 2.0 companies are on the upswing, but software investments are dramatically lower than they were last year.

“The slow recovery we’ve seen for venture capital has faltered,” Jessica Canning, director of global research for Dow Jones VentureSource, said in a news release. “As liquidity and fundraising lag after the economic meltdown in 2008, investors have no choice but to keep a tight rein on investments until the industry is on more solid ground.”

IT companies raised $1.87 billion across 270 deals in the third quarter, compared to $1.94 billion across 248 deals in the second quarter for the IT sector. Facebook captured the IT industry's biggest investment in the quarter, with a $100 million round from undisclosed investors in mid-July.

IT emerged as the top market for venture capital in the third quarter because the healthcare industry suffered a drop from $2.2 billion to $1.7 billion. While the IT sector is typically the leading recipient of venture capital, healthcare companies had briefly overtaken IT with their second quarter total, according to Dow Jones.

Despite receiving more venture money than the healthcare industry, investments in the IT industry are still at a 12-year-low and significantly below 2008 levels. Last year, IT companies took in $12.2 billion in venture investments across 1,328 deals. With data from three out of four quarters in 2009, the industry is at just $5.4 billion across 747 deals.

A bright spot for IT comes from the Web 2.0 sector, where investments surpassed the software market for the first time. The information services sector — which includes most Web 2.0 companies — pulled in $627 million in new investments in the third quarter, up 11% over the same period last year.

Software companies, meanwhile, raised just $581 million in the quarter, a 55% decline from the $1.3 billion invested in the same timeframe last year. “This is the [software] sector's lowest quarterly investment total since 1996,” Dow Jones reports.

For all industries, venture capitalists invested $5.1 billion in 616 deals in the third quarter, down 6% since last quarter and down 38% since the third quarter of 2008. If current trends persist, 2009 will be the worst investment year in U.S. venture-backed companies since 2003, according to Dow Jones.