Highest First Quarter for Dollars Invested Since 2000, but Venture Capital Funding Dips 10% in Q1 from Q4
WASHINGTON, DC – Venture capitalists invested $13.4 billion in 1,020 deals in the first quarter of 2015, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Quarterly venture capital (VC) investment declined 10 percent in terms of dollars and 8 percent in the number of deals, compared to the fourth quarter when $14.9 billion was invested in 1,103 deals. The first quarter is the fifth consecutive quarter of more than $10 billion of venture capital invested in a single quarter.
“Although down slightly from the end of last year, the venture ecosystem deployed a healthy amount of financial capital to the startup ecosystem at the start of 2015, surpassing the $10 billion mark for the fifth consecutive quarter and setting the stage for what we expect to be another busy year for startup investing,” said Bobby Franklin, President and CEO of NVCA. “Last quarter, it was great to see healthy first-time funding levels and that the majority of deals were seed and early stage. Balancing the investment in megadeals, venture capital investors remain focused on building the next generation of companies.”
“Historically, VC investing in the first quarter of the year is typically slower than the rest of the year. So, the drop in dollars invested compared to Q4 is not necessarily indicative of what’s to come in 2015. In fact, the $13.4 billion invested in Q1 of this year is the highest first quarter total we’ve seen since 2000 and is also a 26 percent increase in dollars compared to Q1 of last year,” remarked Tom Ciccolella, US Venture Capital Leader at PwC. “We saw twelve deals over $100 million including two $1 billion investments in Q1, continuing the megadeal trend. One of the billion dollar investments was in the Later Stage of development which contributed, in part, to dollars invested in Later Stage companies doubling in Q1 compared to the prior quarter.”
The Software industry continued to receive the highest level of funding of all industries, despite being down for the quarter. Venture capitalists invested $5.6 billion during the first quarter of 2015, down 8 percent compared to the fourth quarter when total venture investment into the Software industry reached $6.0 billion. The Software industry also counted the most deals in Q1 at 434, down 6 percent compared to Q4.
The Biotechnology industry captured the second largest total during the quarter with $1.7 billion going into 124 deals, a 14 percent decline in dollars invested but a 14 percent increase in deals from the prior quarter. Overall, investments in Q1 in the Life Sciences sector (Biotechnology and Medical Devices combined) received $2.2 billion going into 193 deals, an 18 percent decline in dollars and 3 percent drop in deals when compared to Q4 2014.
The Industrial/Energy industry was the third largest industry for dollars invested with $1.4 billion going into 63 deals, up 133 percent in dollars invested and 5 percent in total number of deals. Part of the increase in dollars can be attributed to the second largest deal of the quarter falling in the Industrial/Energy category, a $1 billion investment.
Five of the 17 MoneyTree industries experienced increases in dollars invested in the first quarter, including Telecommunications (308 percent increase), Healthcare Services (141 percent increase), and Financial Services (80 percent increase).
Venture capitalists invested $3.1 billion into 231 Internet-specific companies during the first quarter of 2015. This investment level represents a 4 percent increase in dollars but a 2 percent drop in deals compared to the fourth quarter of 2014 when $3.0 billion went into 236 companies. “Internet-Specific” is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.
Stage of Development
Seed stage investment was down 32 percent in dollars and 35 percent in deals with $126 million invested into 26 deals in the first quarter, the lowest quarterly deal count since the MoneyTree began tracking VC investments in 1995. Early stage investment was down 34 percent in dollars and 14 percent in deals with $3.7 billion going into 492 deals. Seed/Early stage deals accounted for 51 percent of total deal volume in Q1, compared to 55 percent in the prior quarter. The average Seed stage deal in the first quarter was $4.8 million, up from $4.7 million in the fourth quarter of 2014. The average Early stage deal was $7.5 million in Q1, down from $9.8 million in the prior quarter.
Expansion stage investment was down 15 percent in terms of dollars in Q1 but flat in terms of the number of deals, with $5.4 billion going into 295 deals. Overall, Expansion stage deals accounted for 29 percent of venture deals in Q1, up slightly from 26 percent in the fourth quarter of 2014. The average Expansion stage deal was $18.3 million, down from $21.7 million in Q4 2014.
Investments in Later stage companies rose by 50 percent to $4.2 billion going into 207 deals in the first quarter, the largest quarterly total of dollars invested in Later stage companies since Q4 2000. Later stage deals accounted for 20 percent of total deal volume in Q1, up slightly from the prior quarter. The average Later stage deal in the first quarter was $20.3 million, up from $14.1 million in the prior quarter, attributable in part to four of the 10 largest deals in Q1 falling into the Later stage of development.
First-time financing (companies receiving venture capital for the first time) dollars decreased 30 percent to $1.8 billion in Q1 while the number of deals was down 18 percent from the prior quarter, dropping to 305. First-time financings accounted for 14 percent of all dollars and 30 percent of all deals in the first quarter.
Of the companies receiving venture capital funding for the first time in Q1, Software companies captured the largest share and accounted for 36 percent of the dollars and 46 percent of the deals with 139 companies capturing $657 million. First-time financings in the Life Sciences sector was up 7 percent in dollars from the prior quarter with $440 million going into 42 companies, compared with 33 such companies receiving $410 million in Q4. The average first-time deal in the first quarter was $6.0 million, down from $7.0 million in the prior quarter. Seed/Early stage companies received the bulk of first-time investments, capturing 78 percent of the dollars and 82 percent of the deals in the first quarter of 2015.
Note to the Editor
Information included in this release or related venture capital investment data should be cited in the following way: “The MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters” or “PwC/NVCA MoneyTree™ Report based on data from Thomson Reuters.” After the first reference, subsequent references may refer to PwC/NVCA MoneyTree Report, PwC/NVCA or MoneyTree Report. Charts and tables displaying the data are sourced to “PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters.” After the first reference, subsequent references may refer to PwC/NVCA MoneyTree Report, PwC/NVCA, MoneyTree Report or MoneyTree.
About the PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
The MoneyTree™ Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. It is based on data provided by Thomson Reuters. The survey includes the investment activity of professional venture capital firms with or without a U.S. office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments, in a qualified and verified financing round the entire amount of the round is included. Qualifying transactions include cash investments by these entities either directly or by participation in various forms of private placement. All recipient companies are private, and may have been newly-created or spun-out of existing companies.
The survey excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as roll-ups, change of ownership, and other forms of private equity that do not involve cash such as services-in-kind and venture leasing.
Investee companies must be domiciled in one of the 50 U.S. states or DC even if substantial portions of their activities are outside the United States.
Data is primarily obtained from a quarterly survey of venture capital practitioners conducted by Thomson Reuters. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies. Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.