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Q4 2013 Venture Investments Update

February 19, 2014

Deals Up 4% and Dollars Up 7% Annually
Media, Software & Internet; Early Stage; and DC Area, NY Metro & Silicon Valley Deals Reach Highest Levels in Over a Decade 
Number of Seed Deals Falls 26%, while Average Deal Size Increases 54% to $4.3MM


Q4 2013 Venture Investments Chart

Q4 2013 Venture Investments

PricewaterhouseCoopers/National Venture Capital Association MoneyTreeTM Report, Data: Thomson Reuters  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 annual Dollars broken out

There were 3,995 venture capital deals in the US totaling $29.4B in 2013, a 4% annual increase in number of deals and a 7% increase in dollars invested. Deals in Q4 2013 totaled 1,077 with $8.4B invested, which was a 4% increase in deals and 6% increase in dollars over Q3 2013 and represented a 1% increase in deals and 5% increase in dollars on a rolling four quarters basis. First time financings in 2013 represented 33% of deals and 17% of dollars, compared to 33% and 16% in 2012. Consequently, first time financings increased 3% by deals and 14% by dollars year on year.

The greatest annual gains by significant industry segments came from the Media & Entertainment and Software sectors, up 38% and 27% in dollars raised over 2012, respectively. 2013 investment in both Media & Entertainment and Software companies reached the highest level since 2000. Additionally, the Biotechnology sector increased 8% in dollars raised year on year, while Internet Specific investments increased 7%. Internet Specific investments in 2013 reached the highest level since 2001. Meanwhile, capital invested in Industrial / Energy opportunities fell 49% in 2013, dollars invested in Medical Devices & Equipment fell 17%, and dollars invested in Consumer Products & Services companies fell 7% year on year.

Seed and Early Stage investments increased 14% and 17%, respectively, in capital raised in 2013. However, the number of Seed deals fell 26% such that the average Seed round was $4.3MM, up 54% from $2.8MM in 2012. The average Early Stage deal was only slightly greater at $4.9MM, while Expansion Stage rounds averaged $10MM and Later Stage deals averaged $11.2MM, all similar to 2012 metrics. The number of Seed deals in 2013 was the lowest since 2003, while the number of Early Stage deals and amount of capital invested reached the highest levels since 2000.

Among regions with greater than $1B invested in 2013, the DC Area grew most significantly year on year by 104%, while dollars invested in the Southeast grew 62%, Texas grew by 38%, NY Metro grew by 35%, and capital invested in Silicon Valley was up 8%. In fact, dollars raised in the DC Area, NY Metro, and Silicon Valley were the greatest since 2001. Conversely, dollars raised by companies in the Midwest fell by 24% from 2012 and LA / Orange County investments were down 17% year on year.

Mark McCaffrey, global software leader and technology partner at PwC noted, “Combined with the high ROI being driven by the success of recent IPOs and an active acquisition market, it is no surprise that more venture capital dollars are flowing into early stage software and internet companies. In fact, investments in software companies accounted for more than one-third of all VC investing in 2013.”

“We are hearing that this optimism is being fueled by a strong exit market, an improved economy, and as always, innovative entrepreneurs,” added Bobby Franklin, president and CEO of the NVCA. “There has been some public discussion about recent high valuation levels in private technology companies. Private company valuations follow the public markets and market-leading venture-backed companies are seeing strong interest from investors across the board. We are not hearing concerns of a return to the bubble values of the late 1990s.”

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