“Driven by a strengthening fundraising environment, the venture ecosystem deployed more capital to the innovation economy in the second quarter than any period in the last fifteen years. While this uptick can be partly attributed to non-traditional investors joining funding rounds, venture continues to lead the way in deploying capital to the most promising new technologies and companies,” said Bobby Franklin, President and CEO of NVCA. “With software companies continuing to disrupt entrenched industries and in some cases creating new industries all together, venture investment into the sector increased 30 percent from the first quarter to $7.3 billion, marking the highest total investment into software companies since the inception of the MoneyTree Report in 1995. As valuations increase and more and more companies choose to stay private longer, we are likely to see software’s share of total venture investment continue to rise.”
The Software industry continued to receive the highest level of funding of all industries, increasing 30 percent from the prior quarter to $7.3 billion in Q2 2015. This amount is the largest quarterly investment total going into Software companies since the inception of the MoneyTree Report in Q1 1995. The number of deals also increased to 491, an 11 percent increase compared to the first quarter and the highest quarterly deal count since Q3 2000.
The Media & Entertainment industry was the second largest industry for dollars invested with $2.7 billion going into 118 deals, an increase of 127 percent in dollars and a 34 percent rise in total number of deals. The majority of this increased can be attributed to the largest deal of the quarter falling into the Media & Entertainment industry.
The Biotechnology industry captured the third largest total for dollars invested in Q2 but was second in terms of number of deals with $2.3 billion going into 126 deals, a 32 percent increase in dollars invested but flat in number of deals compared to the prior quarter. This amount is the largest quarterly investment total going into Biotechnology companies since the inception of the MoneyTree Report in Q1 1995. Overall, investments in Q2 in the Life Sciences sector (Biotechnology and Medical Devices combined) accounted for $3.1 billion going into 201 deals, a 41 percent increase in dollars and flat in deals when compared to Q1 2015.
Ten of the 17 MoneyTree industries experienced increases in dollars invested in the second quarter, including Consumer Products & Services (129 percent increase), Media and Entertainment (127 percent increase), Medical Devices & Equipment (71 percent increase), and Financial Services (17 percent increase).
Venture capitalists invested $5.0 billion into 290 Internet-specific companies during the second quarter of 2015. This investment level represents a 64 percent increase in dollars and a 25 percent rise in deals compared to the first quarter of 2015 when $3.1 billion went into 232 companies. “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.
Stage of Development
Seed stage investment was up 85 percent in dollars and 81 percent in deals with $169 million invested into 47 deals in the second quarter. Early stage investment was up 58 percent in dollars and 16 percent in deals with $5.8 billion going into 593 deals. Seed/Early stage deals accounted for 54 percent of total deal volume in Q2, compared to 51 percent in the prior quarter. The average Seed stage deal in the second quarter was $3.6 million, up from $3.5 million in the first quarter of 2015. The average Early stage deal was $9.8 million in Q2, up from $7.2 million in the prior quarter.
Expansion stage investment was up 38 percent in dollars and 12 percent in the number of deals in Q2, with $7.3 billion going into 328 deals. Overall, Expansion stage deals accounted for 28 percent of venture deals in Q2. The average Expansion stage deal was $22.5 million, up from $18.2 million in Q1 2015.
Investments in Later stage companies fell 5 percent to $4.2 billion going into 221 deals in the second quarter. Later stage deals accounted for 19 percent of total deal volume in Q2, down slightly from the prior quarter. The average Later stage deal in the second quarter was $18.8 million, down from $20.2 million in the prior quarter.
First-time financing (companies receiving venture capital for the first time) dollars increased 43 percent to $2.6 billion in Q2 while the number of deals was up 18 percent from the prior quarter, rising to 373. First-time financings accounted for 15 percent of all dollars and 31 percent of all deals in the second quarter.
Of the companies receiving venture capital funding for the first time in Q2, Software companies captured the largest share and accounted for 38 percent of the dollars and 44 percent of the deals with 163 companies capturing $1.0 billion. This is the largest amount invested in Software companies receiving VC for the first time since Q4 2000. First-time financings in the Life Sciences sector more than doubled from the prior quarter with $858 million going into 44 companies, compared with the same number of companies receiving $412 million in Q1 2015.
The average first-time deal in the second quarter was $7.0 million, up from $5.8 million in the prior quarter. Seed/Early stage companies received the bulk of first-time investments, capturing 55 percent of the dollars and 83 percent of the deals in the second quarter of 2015.
MoneyTree Report results are available online at www.pwcmoneytree.com and www.nvca.org.
Note to the Editor
Information included in this release or related venture capital investment data should be cited in the following way: “The MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters” or “PwC/NVCA MoneyTree™ Report based on data from Thomson Reuters.” After the first reference, subsequent references may refer to PwC/NVCA MoneyTree Report, PwC/NVCA or MoneyTree Report. Charts and tables displaying the data are sourced to “PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters.” After the first reference, subsequent references may refer to PwC/NVCA MoneyTree Report, PwC/NVCA, MoneyTree Report or MoneyTree.
About the PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report
The MoneyTree™ Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. It is based on data provided by Thomson Reuters. The survey includes the investment activity of professional venture capital firms with or without a U.S. office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments, in a qualified and verified financing round the entire amount of the round is included. Qualifying transactions include cash investments by these entities either directly or by participation in various forms of private placement. All recipient companies are private, and may have been newly-created or spun-out of existing companies.
The survey excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as roll-ups, change of ownership, and other forms of private equity that do not involve cash such as services-in-kind and venture leasing.
Investee companies must be domiciled in one of the 50 U.S. states or DC even if substantial portions of their activities are outside the United States.
Data is primarily obtained from a quarterly survey of venture capital practitioners conducted by Thomson Reuters. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies. Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.