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Venture Fund Investments Grow By 13.2 Percent Across Country

By Robert Weisman

Venture capital investing in start-ups and young companies increased at a brisk pace in the third quarter, with New England receiving 16.5 percent more money while nationally such funding grew 13.2 percent, according to the widely followed MoneyTree survey of the industry.

One explanation is that venture capitalists are pouring larger sums into companies that continue to find the market for going public difficult.

But some venture capitalists also warned they are hearing echoes of the dot-com boom in the consumer Internet sector. Venture firms, they said, are jumping into technology start-ups that seek to make money from online advertising or supplying content for mobile devices, such as video over cellphones.

“There’s early evidence that some frothiness in some of these subsectors has been creeping back into the market,” said Michael A. Greeley, managing general partner at IDG Ventures in Boston, which manages about $1 billion in investments in the United States and China.

The survey is sponsored by the PricewaterhouseCoopers accounting firm, the research firm Thomson Venture Economics, and the National Venture Capital Association.

Nationally, venture firms poured $5.3 billion into 714 high-tech start-ups in the three months ending Sept. 30, the MoneyTree survey showed. That compared to the $4.6 billion invested in 656 companies in the corresponding period last year. At this rate the US venture industry is on track to hit a four-year investment high in 2005.

In New England, meanwhile, funding for start-up companies increased 16.5 percent in the third quarter, to $612.4 million, from the same period last year. But 2005 is shaping up to be a somewhat more modest year for fund-raising in New England than last year: Investments in local companies through the first nine months of this year are 16.1 percent below the same period in 2004.

New England did vault back into its traditional ranking as the nation’s second-largest venture magnet in the quarter after slipping to third place, behind Silicon Valley and the New York metro area.