Tuesday, July 16, 2013

VC deals in Q2 2013 are down vs. the prior quarter and year-over-year; funding is down 14% vs. last year.

From the Q2 2013 Highlights Report from CB Insights, reporting on VC (but not Angel) activity.

The $7.0 billion invested in 807 deals in Q2’13 represented a decline in deals on both a sequential and year on year basis. Funding was up marginally from Q1’13 ($6.9B) but was down 14% vs. Q2’12 when funding came in at $8.1 billion.

Exits of VC-backed companies were modest overall. Overall, there were 127 VC-backed companies that exited in Q1’13 – 22 IPOs and 105 M&As. While IPO levels climbed, M&A activity was more measured making Q2’13 the 2nd lowest quarter for VC-backed exits in the last five. M&A transactions with disclosed valuations totaled $7.6B – the lowest aggregate value of M&A transactions in the last five qtrs.

 The end of the Series A crunch?  Series A deals and funding climbed in Q2’13 so while it won’t end the crunch, the increase may relieve some of the pressure on Seed VC-backed companies looking for funding especially if the trend continues.  Time will tell.

 Massachusetts climbs back to #2 ahead of NY – After NY overtook Mass on funding in Q1’13, Massachusetts took the #2 spot back in the recent quarter. Massachusetts firms raised $859 million across 70 deals during the quarter, the highest total amount raised since the fourth quarter of 2011, when Massachusetts-based companies raised $959 million. NY still retains its lead on deal activity.

The “big 5,” Cali, Mass., NY, Texas and Wash take top spots for funding. Versus Q1 which saw 44 states see companies funded, Q2’13 saw a little less geographic diversity among the VC set. See table below.

Silicon Valley dominates So Cal - Deals and funding to Southern California companies declined on a year over year and sequential basis making Silicon Valley even more dominant for VC within the Golden State.

Healthcare has a great quarter - In addition to its strong IPO activity levels, the healthcare sector also saw strong VC tallies.  After a dip in Q1’13, deal volume and funding to healthcare companies accelerated in the past quarter. The $1.81B invested in Q2 was a 24% increase from Q1’13.  Early stage investment into healthcare also grew to a five-qtr. high.

Clean Tech funding ends its slide; barely. - In Q2’12, the green/clean tech sector saw $1.47B invested across 49 deals. Since then, activity and funding have been anemic and declining steadily.  But versus Q1’13, the past quarter did see an uptick in funding as it climbed 14% to $465M.  New York came in at #4 for deal activity behind the usual suspects – Cali, Mass and Texas.  Early-stage activity to clean tech was dead.

Social falls off the map - Social companies only saw 2% of funding to the internet sector in Q2’13.  Business intelligence and mobile app development both saw solid gains for funding and deal share.

Seattle-based Tableau Software, backed by NEA, saw the strongest Tech IPO offering of the quarter being valued at ~$2B on the day of its offering.

The excerpts above and diagrams below are drawn from the  Q2 2013 Venture Capital Activity Report provided by CB Insights, a venture capital database.  The full 77-page report is available here.

Angel investments are not included in the numbers above unless an investment round included Angels investing alongside a venture capital firm or corporate venture group. Asked why VC results are available so quickly, while we are still awaiting the Q1 2013 HALO Report on Angel Investing, CB Insights CEO Anand Sanwal replies “we have software that crawls 12,000+ sources daily. It's much more real-time as VC data is less opaque than angel investing.  Angel data is gathered via surveys of angel investors and that process is more labor-intensive.  Hence the results take a bit longer to collect, aggregate and analyze.”

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