Venture capital investments in Minnesota companies turned upward in the first quarter, though analysts cautioned that significant challenges still face the state's entrepreneurial economy.

The $57 million in start-up investment during the quarter was up 48 percent from the previous quarter and 2 1/2 times the total a year earlier, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association. The report uses data from Thomson Reuters.

But the number only looks big compared with 2010, which was the worst year on record for venture capital funding in Minnesota.

"Unfortunately, it's nothing to write home about," said Jay Hare, a partner at PwC. "It's an improvement from an anemic 2010, but the trends and concerns that we talked about in the past persist."

Minnesota ranked 16th in the nation for venture capital investment, representing 1 percent of the national total, the report said.

A large portion of investment in the state typically goes toward medical device companies, and many investors have become skittish about that industry because of uncertainty surrounding FDA regulations.

Minnesota start-ups also found some investors shifting funding to later stage companies. "There is less money available today for early-stage companies," said Bob Paulson, CEO of St. Paul-based medical device company NxThera.

NxThera was one of eight Minnesota companies that received venture capital in the first quarter. About 45 percent of the companies were medical device related.

Paulson said it took eight months to gain funding from Minnetonka-based American Medical Systems, which led its $11.5 million financing round.

Without declaring the start of an upward trend, some venture capitalists pointed out that the $57 million in investment was more than the amount companies raised in any quarter last year.

"It's an encouraging sign," said Michael Gorman, a founding managing director of venture capital firm Split Rock Partners.

Gorman's firm was one of the investors in a $10 million round for tech start-up 8thBridge Inc.

Nationally, venture capital investments increased to $5.9 billion, up 5 percent from the previous quarter, according to the MoneyTree Report. The total number of deals fell 11 percent.

A lot of the growth was in clean technology, which includes businesses related to alternative energy, power supplies, conservation, pollution and recycling. Clean tech investment grew to $1 billion, up 26 percent from the previous quarter.

Wendy Lee • 612-673-1712