1Q VC Data: What Just Happened?

5/21/14Follow @greels1

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their own fundraising stories as they set out to raise the new funds, but to also exploit the robust public capital markets. Arguably, the rotation among industry categories reflects prior investment performance by category. Hardware-centric businesses and those with long product development cycles have chronically disappointed investors; where would biotech be right now, were it not for the “biotech bubble” we witnessed over the past six months?

The other barometer of risk-taking is first-time financings, which tracks companies receiving venture capital for the first time. Some interesting developments jump out of those data:

—First-time financings in the first quarter totaled $1.2 billion, or 13 percent of all investment activity, which compares (poorly) with 21 percent and 19 percent in last year’s first quarter and fourth quarter, respectively.

—Early-stage first-time financings constituted $830 million of that activity, which was down slightly from $887 million in the first quarter 2013, although expansion-stage deals showed a more marked decline to $135 million from $227 million in the prior quarter.

And I always get a kick out of some of the other data buried in the report…

—Twenty-three states had three or fewer venture investments in the first quarter. In fact, seven states had zero.

—California captured $5.5 billion of the $9.5 billion invested, which was up substantially as a percentage of total dollars invested from the same period last year: 58 percent, compared with 48 percent a year ago. That’s further concentration of activity, although for those of us not in California, it is important to note it is a huge state!

—Hawaii, on the other hand, had two venture-backed investments that raised in total $271,000. How cute.

—The top-10 venture investment rounds in the quarter were at least $100 million in size (are those venture deals, really?), with Dropbox’s $325 million registering as the largest raise. And there were no healthcare companies on this list. These mega-rounds reflect funds with either too much capital or a strategy to anoint winners and thereby chill any competitive companies being launched. But will they drive great returns? Stay tuned.

This essay originally appeared on Michael Greeley’s blog and is reposted by permission.

Michael Greeley is a General Partner at Foundation Medical Partners. Follow @greels1

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  • Steve Carver

    Looks like they’re missing some data. PitchBook Data shows 1,072 VC transaction completed in Q1 2014 with a total of $12.3B (versus NVCA’s 951 deals for $9.5B). Q1 2011 saw more activity with 1,319 deals for 12.3B.