venture capital

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.

At the end of 2015, there were concerns that the Venture Capital (VC) industry had peaked and there would be a quick return to 2013 VC investment levels. While there is still six months for the VC markets to see a more rapid slow down, Q1 and Q2 VC numbers indicate that there has only been a slight slowdown in the VC markets. However, a troubling trend from 2014 continues to dominate the VC industry – the strong VC market is driven by investment in mature, late-stage companies – either full-fledged unicorns or their slightly lower-valued counterparts. While unicorns are attracting eye-popping rounds of funding, smaller, younger startups are struggling to attract VC-backing, according to a recent report from PitchBook. In many cases, unicorns are pushing off IPOs due to the substantial rounds of funding that they receive.

The University System of Maryland (USM) recently announced a $25 million fund to invest in USM-affiliated companies or startups created by students, faculty and recent graduates.  Companies already based in USM research parks or university incubators are also eligible for funding. The system, comprised of 12 of the state’s public institutions, would invest $10 million in an early stage investment fund, known as the USM Early Stage Investment Fund (ESIF), over four years, with the remaining $15 million to come from outside investors, the state of Maryland, friends of USM and other venture capital groups. 

In the lead-up to the Biotechnology Innovation Organization’s (BIO) International Convention held this week, the organization released a series of reports on the health of the industry. Collectively, the reports indicate that the bioscience industry is seeing greater employment with better wages, increasing venture investment, but university and federal funding, patent filings and clinical trial success are leveling off or decreasing.

Coming off a record setting year, industry analysts contended that there would be a more cautious U.S. venture capital industry (VC) in 2016 with discussion of a VC bubble. However, in Q1 of 2016, venture capitalists invested more than $10 billion for the ninth consecutive quarter with little concern over a bubble. In total, VCs invested $12.1 billion in 969 deals in the Q1 of 2016, according to the MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA). At the same time, U.S. venture capital firms raised $12.0 billion for 57 funds during Q1 of 2016, making it the strongest quarter for funds raised since Q2 of 2006, according to the Fundraising Report by Thomson Reuters and NVCA. A review of the data indicates continuation of trends in where venture capital is being invested, the decline of investment in seed stage companies, and increasing corporate venture capital activity with 20.6 percent of funds invested in Q1 of 2016 coming from corporate venture capital.

Only 8 percent of partners with the authority to invest at 2,300 micro- and venture capital (VC) firms are women (and only 7 percent of the top 100 firms), according to CrunchBase Women in Venture, a new report providing a detailed snapshot of the state of female investors and founders. The report finds of 54 corporate VC divisions and 101 accelerators, 12 percent of partners were female. The report did find some possible signs of improvement; among 826 VC firms with “deep teams,” 22 percent of lower-titled employees are women, suggesting that opportunities for promotion to partner may yield better balance, and among new micro- and VC firms in the last three years, 16 percent, or 20 of 125, had at least one female partner—double the rate among existing firms. Women in Venture also examined the amount of funding going to companies with at least one female founder and reports that from 2010-2015, 10 percent, or $31.5 billion, of VC funding went to companies with at least one female founder, compared to 17 percent, or $2.4 billion, of seed funding. The report examined whether firms with female investors were more likely to invest in startups with female founders and found no real evidence of this connection.

The U.S. venture capital (VC) industry continued a gradual deflation in activity in Q1 2016, even as capital invested remained at a historically robust level according to Pitchbook’s 1Q 2016 U.S. Venture Industry Report. In Q1 2016, the VC industry also continued the trend of massive late-stage VC rounds with $9.4 billion of $17.7 billion invested in late-stage financing. While VC activities declined in Q1, angel and seed capital deals continued to plateau for another quarter. In its recently released 2015 Annual VC Valuations & Trends Report, Pitchbook researchers projected that the VC industry has peaked and VC activity will slowly return to 2013 levels and its 2016 Q1 report may confirm that assertion over the next couple years. Pitchbook researchers contend that the decline in VC valuations/deals and the plateau in angel/seed financing activity is clear evidence that investors at all levels are exercising a bit more caution in their investments. However, they highlight that both VC and angel investors are still willing to make investments in startups, which are viewed as low-risk, due to the significant size of many late-stage investments. 

More than three-quarters of U.S. venture capital dollars went to companies in California, New York and Massachusetts in 2015, according to data from the PricewaterhouseCoopers (PwC)/National Venture Capital Association (NVCA) Moneytree Report. California companies received over 57 percent of all U.S. investment, about 0.5 percent down from the state’s peak in 2014. Both New York and Massachusetts received about 10 percent of U.S. dollars. Washington, the state with the fourth highest share, trailed far behind at 2.1 percent. California and Massachusetts also both led in venture capital dollars per capita, taking in about $860 and $841 per resident, respectively. Massachusetts continues to lead the nation in deals per capita, with about 6.5 per 100,000 residents.

Despite a small decrease in venture capital deals last year, the San Francisco-Oakland-Fremont metropolitan area remains the most active investment regions on a per capita basis, according to data from the PricewaterhouseCoopers (PwC)/National Venture Capital Association (NVCA) MoneyTree Report. San Francisco led all other MSAs in both total dollars and per capita activity, with its $21 billion in 2015 investment averaging about $4,500 per metro resident. NVCA notes that 133 metros were home to deals in 2015, an encouraging sign that opportunities are opening up in areas outside of the known hotspots.

Last year, the venture capital investment hit a 15-year high, with total dollars topping every year since 2000. A slow fourth quarter brought the remarkable trajectory of the year back down to earth, but with a total of $11.3 billion invested, 2015 became the second highest year on record since PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA) began the Moneytree Report in 1995. Much of this growth was due to larger deals, and, in fact, the total number of deals was down from the previous year. California continues to dominate the market, with California firms receiving 57 percent of all investment. Washington surpassed Texas to join the top five states in terms of venture dollars, and Boston surpassed San Jose to join the top three metropolitan regions.