First-Quarter VC Activity Buoyant at $12.1 Billion, & Top 10 Deals

Venture capital firms invested $12.1 billion in 969 startup deals nationwide during the first three months of 2016, marking the ninth consecutive quarter when VCs invested at least $10 billion in new companies, according to the MoneyTree Report.

The top 10 deals accounted for 25 percent of all capital deployed during the quarter, and was led by a late-stage, $1 billion investment in Lyft, the San Francisco-based ride-sharing company. (More on the top 10 deals below.)

The MoneyTree Report is prepared by PricewaterhouseCoopers and the National Venture Capital Association (NVCA), based on data from Thomson Reuters.

While overall venture activity remained bouyant, this year’s first-quarter numbers were roughly flat in comparison to the last quarter of 2015, when VC funding amounted to almost $12 billion in 1,021 deals, according to MoneyTree data.

In comparison with the first quarter of 2015, though, venture activity showed signs of a slow leak—declining by roughly 11 percent in both dollars and deals. In the year-earlier period, VC firms invested nearly $13.7 billion in 1,085 startups, according to MoneyTree data. Bobby Franklin, president of the NVCA, attributed the decline in year-over-year activity to a pullback by hedge funds, mutual funds, and other nontraditional investors.

“I sometimes refer to them as drive-by investments,” seconded Neeraj Agrawal, a general partner in Battery Ventures’ Boston office. Hedge funds, sovereign wealth funds, and other nontraditional investors “tend to be the last to show up, and the first to leave.”

Agrawal, who joined Battery Ventures in 2000, said the VC boom over the previous two years struck him as “somewhat anomalous,” with total U.S. venture funding rising to almost $60 billion in 2015 and close to $51 billion in 2014. In the previous decade (2003-13), annual venture funding ranged more or less between $20 billion and $30 billion.

“I believe we’re in a sort of multi-quarter journey back to the historical norm,” Agrawal said. “I really think the next quarter will be the first data point in the new norm.”

Tom Ciccolella of PricewaterhouseCoopers also noted that an increase in first-quarter expansion and later-stage financings, combined with a drop in first-time funding deals, suggested that VCs were shifting toward relatively mature startups.

Seed-stage and early stage investments accounted for 48 percent of total deal volume during the first quarter, compared with 57 percent in the prior quarter.

Expansion-stage investments increased by 25 percent over the previous quarter, to $4.1 billion, and the 288 deals marked a 9 percent increase over the prior quarter.

Investments in later-stage companies amounted to $3.5 billion (up 10 percent over the previous quarter) in 213 deals during the … Next Page »

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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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