PwC MoneyTree Reports "Modest" Start For VC Investors in Q1
About $4.7 billion was invested in Q1 2010 in 681 deals, reported PricewaterhouseCoopers and the National Venture Capital Association in its MoneyTree Report.
This represented a 9% decrease in dollars, and 18% fewer deals compared with Q4 of 2009. However, this was higher than the year ago quarter, with $3.4 billion and 635 deals.
Here is the sector breakdown:
- The Biotechnology industry received the highest level of funding for all industries in the quarter with $825 million going into 99 deals. This level of investment represents a 24 percent decrease in dollars and a 14 percent decrease in deals compared to the fourth quarter when $1.1 billion went into 115 deals.
- Medical Devices and Equipment saw a 29 percent decline in dollars and 30 percent decline in deal volume in the first quarter with $517 million going into 61 deals. This sector ranked fourth overall for the quarter in terms of dollars invested.
- The Software industry had the most deals completed in Q1 with 144 rounds, although this represented a drop of 25 percent from the 193 rounds completed in the fourth quarter. In terms of dollars invested, the Software sector was in second place, declining 29 percent from the prior quarter to $681 million in the first quarter of 2010. The drop in the number of deals in the first quarter puts Software at the fewest number of deals since the fourth quarter of 1995.
- The Clean Technology sector, which crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation, saw a 87 percent increase in dollars over the fourth quarter to $773 million. The number of deals completed in the first quarter increased 44 percent to 69 deals compared with 48 deals in the fourth quarter. The increase in Clean Technology investments was driven by several large rounds, including five of the top 10 deals. Internet-specific companies received $807 million going into 158 deals in the first quarter, a 14 percent decrease in dollars and a 19 percent decrease in deals over the fourth quarter of 2009 when $941 million went into 196 deals. 'Internet-Specific' is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company's primary industry category.
- Eight of the 17 MoneyTree sectors experienced dollar declines in the first quarter, including Media and Entertainment (29 percent decrease) and Networking and Equipment (53 percent). Sectors which saw increases in dollars included Semiconductors (52 percent increase), Industrial/Energy (12 percent), Telecommunications (89 percent), Electronics/Instrumentation (73 percent), Financial Services (47 percent), and IT Services (14 percent).
- Seed and Early stage investments declined in the first quarter, dropping 30 percent to $1.4 billion. The number of Seed and Early stage deals dropped 24 percent to 299 from the prior quarter. Seed/Early stage deals accounted for 44 percent of total deal volume in the first quarter, compared to the fourth quarter when it accounted for 47 percent of all deals. The average Seed deal in the first quarter was $5.4 million, up from $4.0 million in the fourth quarter. The average Early stage deal was $4.6 million in Q1, down from $5.6 million in the prior quarter.
- Expansion stage dollars increased 9 percent in the first quarter, with $1.8 billion going into 224 deals. Overall, Expansion stage deals accounted for 33 percent of venture deals in the first quarter, up from 29 percent in the fourth quarter of 2009. The average Expansion stage deal was $7.8 million, up significantly from $6.6 million in the fourth quarter of 2009.
- Investments in Later stage deals remained flat in dollars and fell 20 percent in deals to $1.5 billion going into 158 rounds. Later stage deals accounted for 23 percent of total deal volume in Q1, compared to 24 percent in Q4 2009 when $1.5 billion went into 197 deals. The average Later stage deal in the first quarter was $9.8 million, which increased significantly from $7.8 million in the prior quarter.
- First-time financing (companies receiving venture capital for the first time) dollars and deals decreased 14 percent with $972 million going into 208 deals. First-time financings accounted for 21 percent of all dollars and 31 percent of all deals in the first quarter, compared to 22 percent of all dollars and 29 percent of all deals in the fourth quarter of 2009.
- Companies in the Software, Biotechnology, and Financial Services industries received the highest level of first-time dollars. The average first-time deal in the first quarter was $4.7 million, which is unchanged from the prior quarter. Seed/Early stage companies received the bulk of first-time investments, garnering 56 percent of the dollars and 73 percent of the deals, but fell short of fourth quarter percentages when they accounted for 65 percent of the dollars and 77 percent of the deals
MoneyTree Report results are available online at http://www.pwcmoneytree.com/ and http://www.nvca.org/.