Venture capitalists invested $9.5 billion in 951 deals in the first 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 12 percent in terms of dollars but fell 14 percent in the number of deals, compared to the fourth quarter of 2013 when $8.4 billion was invested in 1,112 deals.
Dollars invested in the Software industry experienced another significant increase in Q1 2014, capturing $4.0 billion and further distancing it by more than three times from the second largest industry, Biotechnology. The last time Software investments reached this level was in Q4 2000. Venture capital investments into Software companies accounted for 42 percent of total dollars and 44 percent of total deals in the first quarter. Five of the top 10 largest deals for the quarter were Software companies.
“Context is everything, and when you consider the context behind the numbers, you start to understand why there was a shift in the first quarter of 2014. Seed and early stage financing numbers are down from the previous quarter, but expansion stage dollars invested are up 34 percent. This was to be expected when you consider the domination by seed and early stage deals in 2012 and 2013,” said Bobby Franklin, President and CEO of NVCA. “Because these companies are now moving to the next stage of their maturing process, the investment rounds tend to be bigger, which explains why the numbers are trending toward the later stages of the investment calendar. To be sure, the spring thaw of the exit markets is providing some firms with new life, but overall capital remains constrained for most venture capital firms.”
“Investments into the Software sector continue to remain healthy as investors look for companies with disruptive technology that challenges the norm,” remarked Mark McCaffrey, global software leader and technology partner at PwC. “These companies are attracting significant funding from venture capitalists and non-traditional investors alike as their business models continue to provide real value across all sectors and get access to global markets. Clearly, the heightened interest is driving healthy valuations which could meet with some volatility. However, barring any significant macroeconomic event, we expect a strong level of investing to continue as these models meet customer needs and deliver value to the stakeholders.”
To read the full report, click here.