Welcome!

API Journal Authors: Carmen Gonzalez, Harry Trott, Elizabeth White, Pat Romanski, Yeshim Deniz

News Feed Item

Venture Capital Investing Reaches Highest Level Since Q4 2000 With $13.0 Billion Invested During Q2 2014, According to the MoneyTree Report

Software Continues to Dominate VC Investing; MoneyTree Reports Largest Ever Quarterly Investment of $1.2 Billion in Q2

WASHINGTON, DC--(Marketwired - July 18, 2014) - Venture capitalists invested $13.0 billion in 1,114 deals in the second quarter of 2014, 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 activity rose 34 percent in terms of dollars and 13 percent in the number of deals, compared to the first quarter when $9.7 billion was invested in 985 deals. The total dollars invested in Q2 2014 marks the largest quarterly investment total since $13.1 billion was invested in Q1 2001. VC investments for the first half of 2014 reached $22.7 billion, the highest first half total since 2001.

Dollars invested in the Software industry experienced another significant increase in Q2 2014, reaching $6.1 billion, which marks only the fourth time since 1995 that investments in Software companies have exceeded $6 billion in a single quarter. The large quarterly total is due in large part to half of the 10 largest deals of the quarter falling into the Software industry, including a $1.2 billion deal, the largest single quarterly deal reported by the MoneyTree Report in the history of the report, which began in 1995.

"Investments going into companies with disruptive technologies remained strong in the second quarter, and VC investing is on pace to exceed the $30 billion invested in 2013," remarked Mark McCaffrey, global software leader and technology partner at PwC. "When we step back, we not only see technology as a megatrend impacting the way we live, but it's also disrupting entire industries by bringing the suppliers even closer to consumers. And, as the value of this technology is undeniable, we see VCs as well as non-traditional investors pursuing these deals more aggressively, resulting in higher valuations and larger capital investments. We're also seeing a shift in the risk profile from the risk of adoption of the technology to the risk in investing in a segment where companies are fiercely battling for market share and the market leader is yet to be determined."

"Not since the early 2000s have we witnessed this level of quarterly investment activity. Despite being over $15 billion below the peak, you can't ignore the historical significance of venture investment during the second quarter," said Bobby Franklin, President and CEO of NVCA. "Before alarmists declare a repeat of the dot-com bubble, it's important to keep in mind that a lot of this activity was driven by a handful of eye-popping investment rounds, including a record-setting funding round of $1.2 billion. Additionally, we hear anecdotally from members about the emergence of new investors in the innovation economy, including the rise of hedge funds, mutual funds and other non-traditional investors making direct investments into presumably pre-IPO companies." 

Industry Analysis

The Software industry received the highest level of funding of all industries, rising 50 percent from the prior quarter to $6.1 billion invested during the second quarter of 2014. The Software industry also counted the most deals in Q2 at 454, a 7 percent increase from the prior quarter. Part of the dramatic increase in investing can be attributed to the largest deal of the quarter going to a software company. The $1.2 billion Expansion stage investment in a transportation software company is the largest deal of the quarter as well as the single largest quarterly investment recorded by the MoneyTree Report since it began reporting on venture capital investing in 1995.

The Biotechnology industry was the second largest sector for dollars invested with $1.8 billion going into 122 deals, rising 69 percent in dollars and 7 percent in deals from the prior quarter. The increase in dollars invested can be at least partially attributed to two large Later stage funding rounds totaling nearly $320 million. The Medical Devices and Equipment industry also experienced an increase in dollars and deals compared to the first quarter, rising 8 percent in dollars and 12 percent in deals in Q2, to $649 million in 73 deals.

The Media & Entertainment industry captured the third largest total in Q2 with $1.0 billion flowing into 124 deals. This represented a 40 percent increase in dollars and a 9 percent increase in deals compared to the prior quarter. The increase in dollars invested can be partially attributed to a large deal, the fifth largest in the quarter.

Nine of the 17 MoneyTree industries experienced decreases in dollars invested in the second quarter, including Business Products and Services (69 percent decrease), Telecommunications (43 percent decrease), and Semiconductors (29 percent decrease).

Venture capitalists invested $2.7 billion into 270 Internet-specific companies during the second quarter of 2014. This investment level is 18 percent higher in dollars and 20 percent larger in deals than the first quarter of 2014 when $2.3 billion went into 225 deals. Two of the top eleven deals for the quarter were in the Internet-specific category. '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 investments rose 46 percent in dollars and 20 percent in deals with $189 million invested into 55 deals in the second quarter. Early stage investments rose 17 percent in dollars and 9 percent in deals with $3.8 billion going into 522 deals. Seed/Early stage deals accounted for 52 percent of total deal volume in Q2, compared to 53 percent in the prior quarter. The average Seed deal in the second quarter was $3.4 million, up from $2.8 million in the first quarter of 2014. The average Early stage deal was $7.3 million in Q2, up from $6.8 million in the prior quarter. 

Expansion stage dollars rose 53 percent in the second quarter, with $5.7 billion going into 308 deals. Overall, Expansion stage deals accounted for 28 percent of venture deals in Q2, up slightly from 27 percent in the first quarter of 2014. The average Expansion stage deal was $18.7 million, up dramatically from $14.0 million in Q1 2014, due in part to the largest deal of the quarter falling into the expansion stage of development.

Investments in Later stage deals increased 25 percent in dollars and 19 percent in deals to $3.2 billion going into 229 rounds in the second quarter. Later stage deals accounted for 21 percent of total deal volume in Q2, up slightly from 20 percent in the prior quarter when $2.6 billion went into 193 deals. The average Later stage deal in the second quarter was $14.0 million, up from $13.3 million in the prior quarter.

First-Time Financings

First-time financing (companies receiving venture capital for the first time) dollars increased 48 percent to $1.9 billion in Q2, while the number of companies rose 20 percent from the prior quarter to 351. First-time financings accounted for 14 percent of all dollars in Q2 while first-time deals accounted for 32 percent of all deals in the second quarter.

Of the companies receiving venture capital for the first time in Q2, Software companies captured the largest share and accounted for 40 percent of the dollars and 44 percent of the deals with 155 companies capturing $743 million. First-time financings in the Life Sciences sector rose 3 percent in dollars from the prior quarter with $267 million going into 32 companies, compared with 38 such companies receiving $261 million in Q1. The average first-time deal in the second quarter was $5.3 million, a jump from $4.3 million in the prior quarter. Seed/Early stage companies received the bulk of first-time investments, capturing 57 percent of the dollars and 75 percent of the deals in the second quarter of 2014.

MoneyTree Report results are available online at www.pwcmoneytree.com and www.nvca.org.

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. Venture capital firms invested $13.0 billion during Q2 2014, according to the MoneyTree report

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.

About the National Venture Capital Association

Venture capitalists are committed to funding America's most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. As the voice of the U.S. venture capital community, the National Venture Capital Association empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community's preeminent trade association, the NVCA serves as the definitive resource for venture capital data and unites its nearly 400 members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.

The PwC Private Equity & Venture Capital Practice is part of the Global Technology Industry Group, www.pwcglobaltech.com. The group is comprised of industry professionals who deliver a broad spectrum of services to meet the needs of fast-growth technology start-ups and agile, global giants in key industry segments: networking & computers, software & Internet, semiconductors, life sciences and private equity & venture capital. PwC is a recognized leader in each industry segment with services for technology clients in all stages of growth.

About PwC US

PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day.

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

About Thomson Reuters

Thomson Reuters is a leading source of information for businesses and professionals. Through a wide range of products and services, Thomson Reuters helps clients make better decisions, be more productive and achieve superior results. Thomson Reuters has headquarters in New York and employs more than 50,000 people worldwide.

Contacts
Clare Chachere
PwC US
512-867-8737
[email protected]

Jeffrey Davidson
Brainerd Communicators for PwC
212-739-6733
[email protected]

Ben Veghte
NVCA
703-778-9292
[email protected]

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

@ThingsExpo Stories
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...
Internet of @ThingsExpo, taking place June 6-8, 2017 at the Javits Center in New York City, New York, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. @ThingsExpo New York Call for Papers is now open.
"ReadyTalk is an audio and web video conferencing provider. We've really come to embrace WebRTC as the platform for our future of technology," explained Dan Cunningham, CTO of ReadyTalk, in this SYS-CON.tv interview at WebRTC Summit at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Everyone knows that truly innovative companies learn as they go along, pushing boundaries in response to market changes and demands. What's more of a mystery is how to balance innovation on a fresh platform built from scratch with the legacy tech stack, product suite and customers that continue to serve as the business' foundation. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, discussed why and how ReadyTalk diverted from healthy revenue and mor...
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and G...
Extracting business value from Internet of Things (IoT) data doesn’t happen overnight. There are several requirements that must be satisfied, including IoT device enablement, data analysis, real-time detection of complex events and automated orchestration of actions. Unfortunately, too many companies fall short in achieving their business goals by implementing incomplete solutions or not focusing on tangible use cases. In his general session at @ThingsExpo, Dave McCarthy, Director of Products...
You have great SaaS business app ideas. You want to turn your idea quickly into a functional and engaging proof of concept. You need to be able to modify it to meet customers' needs, and you need to deliver a complete and secure SaaS application. How could you achieve all the above and yet avoid unforeseen IT requirements that add unnecessary cost and complexity? You also want your app to be responsive in any device at any time. In his session at 19th Cloud Expo, Mark Allen, General Manager of...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, discussed the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
Businesses and business units of all sizes can benefit from cloud computing, but many don't want the cost, performance and security concerns of public cloud nor the complexity of building their own private clouds. Today, some cloud vendors are using artificial intelligence (AI) to simplify cloud deployment and management. In his session at 20th Cloud Expo, Ajay Gulati, Co-founder and CEO of ZeroStack, will discuss how AI can simplify cloud operations. He will cover the following topics: why clou...
As ridesharing competitors and enhanced services increase, notable changes are occurring in the transportation model. Despite the cost-effective means and flexibility of ridesharing, both drivers and users will need to be aware of the connected environment and how it will impact the ridesharing experience. In his session at @ThingsExpo, Timothy Evavold, Executive Director Automotive at Covisint, discussed key challenges and solutions to powering a ride sharing and/or multimodal model in the age ...
The Internet of Things (IoT) promises to simplify and streamline our lives by automating routine tasks that distract us from our goals. This promise is based on the ubiquitous deployment of smart, connected devices that link everything from industrial control systems to automobiles to refrigerators. Unfortunately, comparatively few of the devices currently deployed have been developed with an eye toward security, and as the DDoS attacks of late October 2016 have demonstrated, this oversight can ...
Bert Loomis was a visionary. This general session will highlight how Bert Loomis and people like him inspire us to build great things with small inventions. In their general session at 19th Cloud Expo, Harold Hannon, Architect at IBM Bluemix, and Michael O'Neill, Strategic Business Development at Nvidia, discussed the accelerating pace of AI development and how IBM Cloud and NVIDIA are partnering to bring AI capabilities to "every day," on-demand. They also reviewed two "free infrastructure" pr...
Major trends and emerging technologies – from virtual reality and IoT, to Big Data and algorithms – are helping organizations innovate in the digital era. However, to create real business value, IT must think beyond the ‘what’ of digital transformation to the ‘how’ to harness emerging trends, innovation and disruption. Architecture is the key that underpins and ties all these efforts together. In the digital age, it’s important to invest in architecture, extend the enterprise footprint to the cl...
What happens when the different parts of a vehicle become smarter than the vehicle itself? As we move toward the era of smart everything, hundreds of entities in a vehicle that communicate with each other, the vehicle and external systems create a need for identity orchestration so that all entities work as a conglomerate. Much like an orchestra without a conductor, without the ability to secure, control, and connect the link between a vehicle’s head unit, devices, and systems and to manage the ...
We are always online. We access our data, our finances, work, and various services on the Internet. But we live in a congested world of information in which the roads were built two decades ago. The quest for better, faster Internet routing has been around for a decade, but nobody solved this problem. We’ve seen band-aid approaches like CDNs that attack a niche's slice of static content part of the Internet, but that’s it. It does not address the dynamic services-based Internet of today. It does...
Successful digital transformation requires new organizational competencies and capabilities. Research tells us that the biggest impediment to successful transformation is human; consequently, the biggest enabler is a properly skilled and empowered workforce. In the digital age, new individual and collective competencies are required. In his session at 19th Cloud Expo, Bob Newhouse, CEO and founder of Agilitiv, drew together recent research and lessons learned from emerging and established compa...
Connected devices and the industrial internet are growing exponentially every year with Cisco expecting 50 billion devices to be in operation by 2020. In this period of growth, location-based insights are becoming invaluable to many businesses as they adopt new connected technologies. Knowing when and where these devices connect from is critical for a number of scenarios in supply chain management, disaster management, emergency response, M2M, location marketing and more. In his session at @Th...