Venture Funding Slows as VC Industry Contracts, & Top 10 Deals List

4/19/13Follow @bvbigelow

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the Securities and Exchange Commission under the new provision so far, according to testimony submitted last week by two SEC officials to the House Subcommittee on Investigations, Oversight and Regulations.

“That’s a lot,” Taylor said. “A lot of companies are looking to go public. VCs want to get their cash out. A lot of [venture-backed] companies would have been considered good IPO candidates two, three, four years ago, and they’ve just been waiting for a good market.”

There have been 44 IPOs since the beginning of the year, according to Renaissance Capital, a firm in Greenwich, CT, that provides institutional research about IPOs and new public companies. That’s below the pace of IPOs at this time last year, but the $11.1 billion of total capital raised is ahead of last year’s pace. Not all of those IPOs were venture-backed companies, however.

The downward trend highlighted in the first quarter of the MoneyTree Report is at odds with findings released last week by the New York data firm CB Insights, which found that first-quarter venture funding remained steady in comparison to the previous quarter, and was up over the same period a year ago.

But the same downward trend was reflected in data released yesterday by Dow Jones VentureSource, which also found that U.S. venture funding fell during the first quarter. VentureSource said nearly $6.4 billion was invested in 752 deals—a 12 percent decline in dollars and an 11 percent drop in deals compared with the same period a year ago, when VentureSource said $7.2 billion was invested in 848 deals. The first-quarter numbers also were down compared with the previous quarter, when almost $7.2 billion was invested in 800 deals, according to VentureSource data.

Funding for software startups was a bright spot during the quarter, when venture firms invested $2.3 billion in 329 companies nationwide, according to MoneyTree data. That was a 35 percent increase in funding and a 19 percent jump in deals from the previous year, when VCs invested $1.7 billion in 276 software startups.

Venture funding for Internet-specific deals remained fairly steady, with $1.36 billion invested in 136 deals during the first quarter. In the year-ago period, VCs invested $1.5 billion in 206 deals, according to MoneyTree data.

Venture funding for biotechnology startups amounted to $875 million in 96 deals during the first quarter, down slightly from the $892 million invested in 118 biotechs during the first quarter of 2012. However, it was down sharply from the previous quarter, when VCs provided $1.3 billion in funding for 138 biotech startups.

The NVCA’s Taylor said he was heartened by the 445 seed and early stage venture deals, which accounted for almost 52 percent of the 863 deals counted during the first quarter. The $1.6 billion invested in seed and early stage startups accounted for about 28 percent of the total $5.86 billion that VCs invested across all sectors.

The Top 10 Deals, according to the MoneyTree Report:

1) Genband: Frisco, TX; Networking and equipment; $343.5 million

2) Air Watch: Atlanta; Software; $200 million

3) Pinterest: San Francisco; Media; $200 million

4) LivingSocial, Washington, DC; Consumer; $110 million

5) Nest Labs: Palo Alto, CA; Consumer; $80 million

6) AppNexus, New York; Software; $75 million

7) Intrexon; Blacksburg, VA; Biotechnology; $64.4 million

8) Domo: American Fork, UT; Software; $60 million

9) PTC Therapeutics: South Plainfield, NJ; Biotechnology; $60 million

10) SevOne: Wilmington, DE; Software; $60 million

 

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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