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Q3 2013 Venture Investments Update

// Wiley Becker - Principal, Square 1 Ventures

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October 29, 2013
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Slight Rebound in Total Investment Activity
Software and Early Stage Deals Highest Since 2001
First Time Financings Represent a Healthy 34% of Total Deals

 

Q3 2013 Venture Investments Chart

Q2 2013 Venture Investments

PricewaterhouseCoopers/National Venture Capital Association MoneyTreeTM Report, Data: Thomson Reuters ; 2013 annualized from 09/30/13; Industry, Stage, and Regional data for quarter end; Consumer Industry includes Business Products & Services, Computers & Peripherals, Consumer Products & Services, Electronics / Instrumentation, Financial Services, IT Services, Media & Entertainment, and Retail / Distribution; Industry Sector includes Biotechnology, Healthcare Services, and Medical Devices & Equipment; Other Industry includes Industrial / Energy, Networking & Equipment, Semiconductors, and Telecommunications; Top four Regions by Dollars broken out

There were 1,005 venture capital deals in the US in Q3 2013 totaling $7.8B. This continued a quarter on quarter increase in both deals and dollars and also represents a 2% increase in number of deals and a 4% increase in dollars raised on a rolling four quarters basis. 346 of the deals in Q3 2013 were first time financings, which totaled $1.3B. This represents an increase in both deals and dollars over Q2, but in the same proportion to total deals and dollars raised, at 34% and 16% respectively.

With strong Q3 2013 figures, the Financial Services, Telecommunications, and Business Products and Services industries are up 47%, 43%, and 37% in capital raised in a rolling four quarters comparison. The Software sector is also up 17% and accounted for $3.6B of dollars raised in Q3 2013, which is this first time since Q2 2001 that capital raised by Software companies surpassed $3B. Additionally, nine of the 11 largest deals in Q3 2013 were in the Software industry. Meanwhile, Retailing / Distribution deals are down 34% and Cleantech deals are down 25% in dollars raised on a rolling four quarter basis.

As of Q3 2013, Seed investments are down 5%, while Early Stage and Later Stage investments are up 10% and 4%, respectively, in capital raised in a rolling four quarters comparison. Further, Early Stage deals exceeded $2.7B in Q3 2013, which is the largest amount raised by Early Stage companies since Q1 2001. Seed deals averaged $3.0MM in Q3 2013, while Early Stage deals averaged $5.0MM, Expansion $11.1MM, and Later Stage $12.6MM.

Regionally, DC area deals are up 23%, Southwest / Texas up 9%, Silicon Valley up 8%, and NY Metro up 7% in dollar amount on a rolling four quarter basis. Philadelphia Metro and Colorado deals are down 26% and 11%, however.

More venture capital dollars are going into more software deals than we’ve seen in the past decade,” said Mark McCaffrey, global technology partner and software leader at PwC US. “The continued increase in valuations for innovative and disruptive technologies in software-related companies, coupled with the increase in exit activity, is driving venture capitalists to make more investments in this space. And, at the current pace of investing, we should see total venture capital investments in 2013 exceed the annual total from 2012.”

John Taylor, head of research at the NVCA, added,

With more than half of this quarter’s deals coming from early and seed stage deals, there’s credible reason to be optimistic about the future of innovation and the vibrancy of the startup ecosystem. Software is a natural increased area of focus given that many tech deals are less capital intensive to get to proof of concept.”

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