Venture capitalists invested $9.9 billion in 1,023 deals in the third 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 declined 27 percent in terms of dollars and 9 percent in the number of deals, compared to the second quarter when $13.5 billion was invested in 1,129 deals. The third quarter is the sixth consecutive quarter of more than 1,000 companies receiving venture capital investments in a single quarter. With more than $33.0 billion invested through the first three quarters, total venture investing in 2014 has eclipsed total venture investing in all of 2013, which totaled $30.0 billion.
“Driven by a strong IPO market for venture-backed companies and the rise of startups in every region across the country, we continue to see a greater number of new players joining the venture game,” said Bobby Franklin, President and CEO of NVCA. “The emergence of non-traditional investors, including hedge funds and mutual funds, is contributing to the increase in venture investing this year. Another factor that can’t be ignored is the changing nature of our economy, where startup companies are disrupting entrenched industries and, in some cases, creating new industries altogether. Traditional and non-traditional venture investors alike recognize this and want to get in on the ground floor of innovation.”
“Despite the drop in VC dollars in Q3, we continue to see a healthy level of investing. In fact, venture capitalists have already invested more in the first three quarters of the year than they did in all of 2013, and investments are on pace to surpass $40 billion in 2014,” remarked Mark McCaffrey, global software leader and technology partner at PwC. “In addition to the continued participation of non-traditional investors, another factor driving the strong investment levels is the increasing prevalence of mega deals, deals exceeding $100 million, which we’ve seen over the past few quarters. We’ve already counted more than 30 mega deals in 2014 compared to only 16 in all of 2013.”
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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.
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.
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