PWC MoneyTree: VC Industry Hits 10th Consecutive Quarter of $10B+ Invested in Q2 2016

For the 10th consecutive quarter, the venture capital (VC) industry invested $10 billion in a single quarter after investing $15.3 billion in Q2 2016, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA). Based on data provided by Thomson Reuters, the report highlights that “total venture dollars deployed to startup companies for the quarter increased 20 percent ($15.3 billion invested) and total deal count was down 5 percent (961 deals completed), compared with Q1 of 2016 when $12.7 billion was invested in 1,011 deals.” In comparison to this time last year, Q2 2015, dollars and deals are down 12 and 22 percent, respectively.

PwC researchers found that seed stage investments declined by 5 percent during Q2 (totaling $535 million in 45 deals) from Q1 of 2016 and represented only 3 percent of all venture investment dollars for the quarter and 5 percent of all deals. The average seed stage deal in Q2 was $11.9 million – up from $8.4 million in Q1. The report also highlights that early stage investments declined by 14 percent from Q1 of this year in dollars invested ($4 billion) while seeing a 3 percent increase in deals (446 deals completed). The average early stage deal in Q2 was $8.9 million – a 16.8 percent decrease from Q1 ($10.7 million average deal size). These two stages of investments accounted for approximately 51 percent of all deals.

Similar to the findings from the recent Q2 report by PitchBook, PwC researchers found that VC set their sights on expansion stage companies with the average expansion stage deal at $29.1 million – up by more than double from $13.7 million in the first quarter. This can be attributed to a single investment deal that attracted $3.5 billion in expansion stage funding. Expansion stage deals accounted for almost 56 percent of all VC dollars while only accounting for 30 percent of all deals. PwC also found that many of these deals were follow-on funding investments made to companies that previously received VC-backing. They found that only 13 percent of dollars invested ($1.7 billion) and only 29 percent of all deals (1,677) going to first-time financing (companies receiving venture capital for the first time).

With regardto VC investments by industry, Q2 shows another quarter of consistency with 10 of the 17 MoneyTree industries remaining flat or seeing increases in dollars invested as well as the top three industries for VC attraction remaining consistent. The software industry continued to receive the highest level of funding of all industries –$8.7 billion received across 379 deals for the quarter. Biotechnology companies received the second largest amount of venture capital for the quarter with $1.7 billion invested into 100 deals. IT service companies received just under $1 billion invested ($946 million deployed across 80 deals) to finish third.