Washington – Venture capitalists invested $17.5 billion in 1,189 deals in the second 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 increased 30% in terms of dollars and 13% in the number of deals, compared to the first quarter when $13.5 billion was invested in 1,048 deals. The second quarter is the sixth consecutive quarter of more than $10 billion of venture capital invested in a single quarter.
“In addition to a significant uptick in total investing in Q2, the $7.3 billion invested in Software companies exceeded the total VC dollars invested across all industries in 51 of the last 82 quarters,” remarked Tom Ciccolella, US venture capital leader at PwC. "We saw 26 megadeals (deals $100m or greater) in Q2, including yet another billion dollar investment. After seeing the very first billion dollar VC investment in Q1 of last year, we now count four of the last five quarters with companies receiving billion dollar investments, adding to the ever growing herd of unicorns which is approaching triple digits. Given the current pace of investing, VC in 2015 is on track to well exceed the $50 billion invested in all of 2014."
“Driven by a strengthening fundraising environment, the venture ecosystem deployed more capital to the innovation economy in the second quarter than any period in the last fifteen years. While this uptick can be partly attributed to non-traditional investors joining funding rounds, venture continues to lead the way in deploying capital to the most promising new technologies and companies,” said Bobby Franklin, president and CEO of NVCA. “With software companies continuing to disrupt entrenched industries and in some cases creating new industries all together, venture investment into the sector increased 30% from the first quarter to $7.3 billion, marking the highest total investment into software companies since the inception of the MoneyTree Report in 1995. As valuations increase and more and more companies choose to stay private longer, we are likely to see software’s share of total venture investment continue to rise.”
Industry analysis
The Software industry continued to receive the highest level of funding of all industries, increasing 30% from the prior quarter to $7.3 billion in Q2 2015. This amount is the largest quarterly investment total going into Software companies since the inception of the MoneyTree Report in Q1 1995. The number of deals also increased to 491, an 11% increase compared to the first quarter and the highest quarterly deal count since Q3 2000.
The Media & Entertainment industry was the second largest industry for dollars invested with $2.7 billion going into 118 deals, an increase of 127% in dollars and a 34% rise in total number of deals. The majority of this increased can be attributed to the largest deal of the quarter falling into the Media & Entertainment industry.
The Biotechnology industry captured the third largest total for dollars invested in Q2 but was second in terms of number of deals with $2.3 billion going into 126 deals, a 32% increase in dollars invested but flat in number of deals compared to the prior quarter. This amount is the largest quarterly investment total going into Biotechnology companies since the inception of the MoneyTree Report in Q1 1995. Overall, investments in Q2 in the Life Sciences sector (Biotechnology and Medical Devices combined) accounted for $3.1 billion going into 201 deals, a 41% increase in dollars and flat in deals when compared to Q1 2015.
Ten of the 17 MoneyTree industries experienced increases in dollars invested in the second quarter, including Consumer Products & Services (129% increase), Media and Entertainment (127% increase), Medical Devices & Equipment (71% increase), and Financial Services (17% increase).
Venture capitalists invested $5.0 billion into 290 Internet-specific companies during the second quarter of 2015. This investment level represents a 64% increase in dollars and a 25% rise in deals compared to the first quarter of 2015 when $3.1 billion went into 232 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 up 85% in dollars and 81% in deals with $169 million invested into 47 deals in the second quarter. Early stage investment was up 58% in dollars and 16% in deals with $5.8 billion going into 593 deals. Seed/Early stage deals accounted for 54% of total deal volume in Q2, compared to 51% in the prior quarter. The average Seed stage deal in the second quarter was $3.6 million, up from $3.5 million in the first quarter of 2015. The average Early stage deal was $9.8 million in Q2, up from $7.2 million in the prior quarter.
Expansion stage investment was up 38% in dollars and 12% in the number of deals in Q2, with $7.3 billion going into 328 deals. Overall, Expansion stage deals accounted for 28% of venture deals in Q2. The average Expansion stage deal was $22.5 million, up from $18.2 million in Q1 2015.
Investments in Later stage companies fell 5% to $4.2 billion going into 221 deals in the second quarter. Later stage deals accounted for 19% of total deal volume in Q2, down slightly from the prior quarter. The average Later stage deal in the second quarter was $18.8 million, down from $20.2 million in the prior quarter.
First-time financings
First-time financing (companies receiving venture capital for the first time) dollars increased 43% to $2.6 billion in Q2 while the number of deals was up 18% from the prior quarter, rising to 373. First-time financings accounted for 15% of all dollars and 31% of all deals in the second quarter.
Of the companies receiving venture capital funding for the first time in Q2, Software companies captured the largest share and accounted for 38% of the dollars and 44% of the deals with 163 companies capturing $1.0 billion. This is the largest amount invested in Software companies receiving VC for the first time since Q4 2000. First-time financings in the Life Sciences sector more than doubled from the prior quarter with $858 million going into 44 companies, compared with the same number of companies receiving $412 million in Q1 2015.
The average first-time deal in the second quarter was $7.0 million, up from $5.8 million in the prior quarter. Seed/Early stage companies received the bulk of first-time investments, capturing 55% of the dollars and 83% of the deals in the second quarter of 2015.
MoneyTree Report results are available online at www.pwcmoneytree.com and www.nvca.org.
Source: MoneyTree Report