Tech Investment Trends: Private Equity Bullish on Biotech, Clean Tech and Social Media

Venture funding has slowed considerably over the past year, but there are still opportunities for emerging technology companies to secure funding. While VCs are unquestionably more selective and doing far fewer deals, they will soon be ready to get off the sidelines to support companies in promising sectors.

So what sectors are stingy venture investors putting their money in? Biotech, which encompasses pharmaceuticals, diagnostics, medical devises, and clean tech were hot sectors that slumped in the first quarter of 2009, yet many still view it as a bastion of investment opportunity.

According to FierceBiotech.com, an online news site that follows the industry, biotech funding in 2009 has already surpassed the total raised for all of 2008, fueled by a surge of deals in Q2.

“Biotech is a sector that we remain very excited about,” said Mouli Cohen, entrepreneur and founder of innovation fund Voltage Capital. “This is an incredible time of new discovery in life sciences and the next decade should bring about unprecedented advances in diagnostics and therapeutics.”

The clean tech sector rode of wave of venture investment in 2008, raking in nearly 80 percent of all venture capital dollars. The sector has received a cold shoulder from VCs so far in 2009, but according to a National Venture Capital Association survey, more than 60 percent of VCs surveyed said they expect to increase their investments in clean tech in the next three years.

"[Cleantech] is faring better than the rest of the venture capital sectors -- that's driven by the sense that the government policy thinking has changed radically with the new administration," said David Prend, a NVCA director and managing general partner at the venture capital firm RockPort Capital Partners, in an interview with the New York Times.

New media and social networking plays continue to grow in favor. The social networking phenomenon has generated a new market for services and applications designed to interface with Twitter, Facebook, MySpace, LinkedIn, YouTube and other sites.

Most recently, Twitter, the microblogging service, has spawned a host of VC-backed related services including search engines, URL shortening services and micropayment platforms, which have been increased as these networks become more ubiquitous on smart phones the popularity of mobile applications explodes.

Facebook is fast approaching 200 million members worldwide and has become a favorite platform for media sharing. It's not surprising that VCs view Facebook as a potentially game changing global marketplace, and are moving rapidly to fund developers and entrepreneurs who can take advantage of this new frontier.