Today the NVCA and PwC issued the Q2 MoneyTree VC investment numbers based on data from Thomson Reuters.  Upon first glance, the second quarter fuels the fodder about a new Internet bubble - with the highest level of Internet investment in a decade.  Here at the NVCA we continue to assert that the excitement around the social media space remains healthy -- perhaps a bit frothy -- but healthy nonetheless.  Consider the following:

• The level of Internet investing this quarter was driven by 5 large deals which made up 25 percent of the quarter's Internet investment dollars.  These rounds were exclusively expansion and later stage deals going into mature companies, which during the 2000 bubble may have already been public.  Venture capitalists are nurturing these companies for the appropriate amount of time rather than exiting too early.
• The level of Internet investing in Q2 was $2.3 billion dollars into 275 deals.  At the height of the "real" Internet bubble in the first quarter of 2000, venture capitalists invested $13.6 billion into 977 deals.  There is a huge difference.
• Only 40 percent of the Internet deals completed in Q2 were first rounds - the remainder were follow-on, suggesting momentum in existing portfolios.  Milestones are being reached and these companies are moving forward.
• Anecdotally, there are much fewer "me-too" companies being funded this time around.  Inevitably there will be a shakeup and fall out because we still live in a Darwinian world, but we aren't seeing the level of copycat companies that we did in 2000.  Venture capitalists are savvy enough to know that ultimately there will only be three or four winners in each category.

The Internet category is not the only sector that appears "bubbly" this quarter.  Life sciences (biotechnology and medical devices) also saw an significant increase to $2.1 billion dollars into 212 deals.  But again, a deeper look into theses numbers shows the majority of this investment is in expansion and later stage deals, suggesting that venture firms are focused on sustaining their existing portfolio companies in a still challenging exit market.

As I remarked in the press release, the money raised by venture capital firms in the last three years does not support a bubble theory -- at least in the same way we experienced one in 2000.  The venture industry has raised far less money than it has invested over the last three years and this level of investment can not continue unless more dollars are raised in the coming quarters.  In fact, the industry would be better served if a bit more money flowed from institutional investors to a broader array of firms -- not less.