|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VENTURE
CAPITAL
INVESTING
RISES 19% TO
$5.8 BILLION
IN Q2 2005
--
Late Stage
Investing Hits
4 Year High;
Earlier Stage
Jumps on Large
Deals --
-- Life
Sciences
Returns to
Prominence --
Washington,
D.C., July 26,
2005 –
Venture
capitalists
invested $5.8
billion in 750
companies
in the second
quarter of
2005,
according to
the MoneyTree
Survey by
PricewaterhouseCoopers,
Thomson
Venture
Economics and
the National
Venture
Capital
Association.
Funding
increased
over Q1 2005
of $4.9
billion, and
approached Q2
2004 of $6.1
billion. For
the first half
of 2005,
investing
totaled $10.6
billion,
tracking
closely to
full year 2004
of $21
billion. Over
the past two
years,
quarterly
investing has
ranged from
$4.6 billion
to $6.1
billion.
Later stage
funding
reached a
four-year high
at $2.4
billion in Q2
2005; and
investments in
Start-up and
Early stage
companies
increased to
$1.3 billion,
a three-year
high, on the
strength
of two very
large deals.
After a dip in
the first
quarter of
2005, Life
Sciences
investing
regained
the dominance
it has held
for the past
two years with
$1.5 billion
in Q2 2005.
Mark Heesen,
president of
the National
Venture
Capital
Association,
said: “The
strength at
the
early and late
stage ends of
the venture
spectrum
indicates
where we are
in the current
investing
lifecycle.
Many venture
capital firms
are deploying
the final
portions of
current funds
into late
stage
rounds while
those that
have recently
raised new
funds are
focusing more
on earlier
stage deals.
We expect to
see the scales
tip towards
early stage as
we move
through the
next 18
months.
We are
encouraged to
see investment
levels remain
within the
‘RIPE’
zone of $4-6
billion as
this
continues to
reflect a
sustainable
pace.”
Tracy
Lefteroff,
global
managing
partner of the
venture
capital
practice at
PricewaterhouseCoopers,
observed:
“We’re
seeing both
consistency
and diversity.
Consistency in
the overall
level of
investing
and in the
overall
ranking of
industry
sectors. At
the same time,
we have
diversity
across stages
of
company
maturity, and
first-time vs.
follow-on
rounds. The
largest deals
of the quarter
demonstrate
diversity on
all counts.
It’s a
healthy
balance.”
Stage
of Development
and 12-Month
Average
Valuations
Continuing a
trend that
began late
last year,
Later stage
funding
increased to
$2.4 billion
in Q2
2005, the
highest dollar
amount in the
past four
years. For the
first six
months of
2005, Later
stage
investing
amounted to
41% of all
dollars, far
above the 2004
average of 34%
and a 10-year
high.
However, the
average
post-money
valuation
slipped to
$59.9 million
for the 12
months ending
Q1
2005 compared
to $63.5
million for
the Q4 2004
period. (Note
that valuation
data lags
investment
data by one
quarter.)
Funding for
Start-up and
Early stage
companies
jumped to $1.3
billion in Q2
2005 compared
to $830
million in the
prior quarter
on the
strength of a
$311 million
deal – the
largest single
round in the
last
five years.
Even excluding
the large
deal, dollar
investing in
these
companies
still rose in
the second
quarter.
Year-to-date,
473 Start-up
and Early
stage
companies have
garnered $2.1
billion, or
20% of
all dollars
invested,
similar to
2004. Average
post-money
valuations of
Early stage
companies were
essentially
flat at $13.6
million for
the 12 months
ending Q1 2005
compared to
$14.2 million
for the
period ending
Q4 2004.
Investing in
Expansion
stage
companies held
steady with
287 companies
receiving $2.1
billion in
the second
quarter. For
the first half
of 2005,
Expansion
companies
accounted for
38% of all
venture
capital
dollars, well
below last
year’s
average of
46%. Average
post-money
valuations
dropped
slightly
to $54.3
million versus
$58.2 million
for the prior
period
According to
Adam Reinebach,
vice president
at Thomson
Venture
Economics,
“Even when
you
exclude the
$311 million
deal, the
largest Early
stage deals in
Q2 were, on
average, much
bigger
than the top
Early stage
financings in
Q1. With
fundraising
picking up,
and with
venture
capitalists s
till being
fairly
selective, the
most promising
early stage
companies
could see
larger rounds
in the
future.”
Sector
and Industry
Analysis
The Life
Sciences
sector
(Biotechnology
and Medical
Devices
industries,
together)
bounced back
to
$1.5 billion
invested in
154 companies
compared to
$1.0 billion
invested in
135 companies
in Q1 2005.
For the first
half of 2005,
Life Sciences
accounted for
25% of all
venture
investing, in
line with its
dominant
position over
the past two
years.
The Software
industry
continued to
be the largest
single
industry
category with
231 companies
capturing $1.3
billion,
slightly above
the prior
quarter.
During the
first half of
2005, Software
represented
23% of all
venture
capital
dollars and
30% of all
deals,
virtually the
same
proportions
as in 2004.
Telecommunications,
buoyed by a
large
follow-on
deal, hit a
two-year high
with $562
million in 53
companies in
Q2 2005. For
the first half
of 2005,
Telecommunications
accounted for
9% of all
venture
capital
dollars,
consistent
with 2004
levels. The
Networking
industry
turned up to
$469 million
in
51 companies
including two
sizeable
follow-on
rounds.
Year-to-date,
Networking
remained close
to
its recent
norm with 7.6%
of all
dollars.
The largest
single deal of
the quarter
was in the
Financial
Services
industry. It
catapulted the
category
to a four-year
high of $340
million.
However,
Financial
Services will
likely return
to historical
norms in the
coming
quarters.
Other major
industry
categories
were generally
consistent
with
investment
activity
seen over the
prior year.
First-Time
Financings
First-time
financing
settled in at
its highest
level in two
years with 218
companies
receiving $1.4
billion
in Q2 2005,
roughly the
same as the
prior quarter.
For the first
half of 2005,
first-sequence
financings
accounted for
25% of all
dollars, the
highest
aggregate
proportion
since calendar
year 2000. So
far
this year, 427
companies got
their first
round of
institutional
venture
capital, on
pace with
2004.
The most
first-time
deals were in
the Software
industry and
Life Sciences
sector with 63
companies
and 41
companies,
respectively.
While this
essentially
mirrored the
pattern of
overall
industry
investing,
the first-time
industry
ranking
deviated
thereafter.
Following with
15 companies
each were
Semiconductors
and Consumer
Products &
Services
including
nutrition,
health, and
beauty
products.
Industrial/Energy
including
several solar
energy
companies was
next with 14
companies.
Telecommunications
companies,
many in the
wireless
arena,
followed with
13 deals.
Remaining
deals
were spread
across other
industries.
Networking and
Healthcare
Services were
last, each
with two
companies
receiving
first-time
financing.
About the
PricewaterhouseCoopers/Thomson
Venture
Economics/National
Venture
Capital
Association
MoneyTree™
Survey The
MoneyTree™
Survey
measures
cash-for-equity
investments by
the
professional
venture
capital
community in
private
emerging
companies in
the U.S.
The survey
includes the
investment
activity of
professional
venture
capital firms
with or
without a
US 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 US 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.
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.
 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
