Venture capitalists invested $6.7 billion in 913 deals in the second quarter of 2013, according to the MoneyTree Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.
Quarterly venture capital (VC) investment activity rose 12% in terms of dollars and 2% in the number of deals compared to the first quarter of 2013 when $6 billion was invested in 896 deals.
The Internet-Specific and Biotechnology sectors saw increases in both dollars and number of deals in the second quarter. Additionally, companies receiving VC funding for the first time, as well as those companies in the early stage of development, experienced jumps in dollars invested.
“Life sciences investment is poised for a slow and steady recovery, provided we can continue to see progress on the regulatory front," said Mark Heesen, president of the NVCA.
"The increase in early stage investing is an encouraging sign that entrepreneurs with innovative ideas can get the funding they need to succeed," said Mark McCaffrey, global technology partner and software leader at PwC U.S. "As the exit window continues to open, we'll continue to see VCs shifting their focus back to companies in the earlier stages of development. In particular, startups that are able to drive innovation by developing disruptive technologies that are easy to deploy and deliver ongoing value to the user will be of great interest to venture capitalists."
The Biotechnology industry was the second largest sector for dollars invested with $1.3 billion going into 103 deals, up 41% in dollars and 4% in deals from the prior quarter. This increase was driven by the strength of two large funding rounds in the quarter. Medical Device investing of $543 million into 71 deals represented a 1% decline in both dollars and deals. Investments in the Life Sciences sector overall (Biotechnology and Medical Devices) rose 25% in dollars and 2% in deals, purely on the strength of investing in the Biotech sector.
Seed stage investments dropped 34% in dollars and 29% in deals, with $134 million invested in 37 deals in the second quarter. Early stage dollar investments rose to their highest level in six quarters, rising 63% in dollars and 18% in deals, to $2.5 billion going into 480 deals. Seed/Early stage deals accounted for 57% of total deal volume in Q2, compared to 51% in the first quarter. The average Seed deal in the second quarter was $3.6 million, down from $3.9 million in Q1. The average Early stage deal was $5.2 million, up significantly from $3.7 million in the prior quarter.
Expansion stage dollars increased 3% in the second quarter, with $2.1 billion going into 214 deals. Overall, Expansion stage deals accounted for 23% of venture deals in the second quarter, slightly less than the 26% in Q1. The average Expansion stage deal was $9.8 million, jumping up nearly $1 million from $8.9 million in Q1.
Investments in Later stage deals decreased 12% in both dollars and deals to $2 billion going into 182 rounds in the second quarter. Later stage deals accounted for 20% of total deal volume in Q2, compared to 23% in Q1, when $2.2 billion went into 206 deals. The average Later stage deal in the second quarter was $10.8 million, identical to Q1.
First-time financing (companies receiving venture capital for the first time) dollars increased 24% to $1.1 billion going into 302 companies in Q2, a 10% increase in the number of deals from Q1. First-time financings accounted for 17% of all dollars and 33% of all deals in the second quarter, compared to 15% of all dollars and 31% of all deals in the first quarter. The average first-time deal in the second quarter was $3.7 million, up from $3.2 million in Q1.
The Life Sciences sector experienced a dramatic increase in first-time financing, more than doubling in dollars from Q1 to $328 million. Thirty-three Life Sciences companies received VC funding for the first time in Q2, up from only 22 companies in the first quarter.
Seed/Early stage companies received the bulk of first-time investments, capturing 83% of the dollars and 85% of the deals in the second quarter, the highest percentage totals for both dollars and deals since the MoneyTree began reporting VC investment levels in 1995.