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VCs Boost Investment In IT

A new report says venture capitalists pumped $3 billion into IT firms in the second quarter, the most in two years.

Venture capitalists pumped $3 billion into IT firms in the second quarter, the largest disbursement of investment to tech ventures in two years, and 11% more than first-quarter outlays, according to a report issued Monday by professional-service firm Ernst & Young and financial-data provider VentureOne.

The median amount of IT deals reached $8 million. Second and subsequent round funding was even higher, averaging $10 million. "This increase in IT investment reflects investors' renewed bullishness about the prospects for a successful exit as a result of the continuing positive outlook for corporate technology spending," says Rick Fezell, Ernst & Young emerging and growth markets leader.

By far, software firms represented the biggest category venture capitalists invested in the IT sector. Software firms received $1.4 billion, the highest amount in nearly two years, representing a 22% rise in just one quarter. Of the 294 IT deals, 153 involved software concerns. The software category also accounted for the largest deal of the quarter: the $122 million investment in RiskMetrics Group, a provider of software for financial analytics.

Communications ventures were a distant second among IT firms: receiving $686.2 million, up 7% from the previous quarter.

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