Q3 2011 MoneyTree Report

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www.pwcmoneytree.com The Q3 2011 MoneyTree™ results are in! This special report provides summary results of Q3 2010, Q2 2011, and Q3 2011. More detailed results, including an expanded version of this report, can be found on the MoneyTree™ website at www.pwcmoneytree.com. PricewaterhouseCoopers National Venture Capital Association MoneyTree TM Report Q3 2011 Data provide by Thomson Reuters

Transcript of Q3 2011 MoneyTree Report

Page 1: Q3 2011 MoneyTree Report

www.pwcmoneytree.com

The Q3 2011 MoneyTree™ results are in! This special report provides summary results of Q3 2010, Q2 2011, and Q3 2011. More detailed results, including an expanded version of this report, can be found on the MoneyTree™ website at www.pwcmoneytree.com.

PricewaterhouseCoopers National Venture Capital Association

MoneyTreeTM ReportQ3 2011Data provide by Thomson Reuters

Page 2: Q3 2011 MoneyTree Report

Venture capitalists invested $6.95 billion in 876 deals in the third quarter of 2011. Quarterly venture capital investment activity fell 12 percent in terms of dollars and 14 percent in the number of deals compared to the second quarter of 2011 when $7.9 billion was invested in 1,015 deals.

For the first three quarters of 2011, venture capitalists invested $21.2 billion into 2,725 deals, representing 20 percent more dollars and three percent more deals as the first three quarters of 2010.

The Life Sciences (biotechnology and medical device industries combined) and Clean Technology sectors saw marked decreases in both dollars and number of deals while the Software sector enjoyed its strongest quarter in almost 10 years.

Q1(719)

Q3(730)

0

5

10

15

20

4,121

4,744

4,423

5,387

5,184

6,056

4,811

6,192

5,045

6,143

5,798

5,7566,374

`03 `04 `05 `06 `07 `08 `09 `10 `11

$ in millions

QuarterNumber of deals

Q4(801)

Q1(729)

Q2(870)

Q3(706)

Q4(861)

Q1(749)

Q2(849)

Q3(803)

Q4(846)

Q1(894)

Q2(995)

Q3(938)

Q4(988)

Q1(887)

Q2(1,084)

Q3(1,030)

Q4(1,101)

Q1(1,044)

Q2(1,088)

Q3(1,029)

Q4(939)

Q1(665)

Q2(742)

Q3(735)

Q4(914)

Q1(793)

Q2(1,005)

Q3(850)

Q4(848)

Q1(834)

7,1106,687

6,376

7,2037,448

7,904

8,135

7,903

7,709

7,288

5,940

3,776

4,7215,316

5,855

5,197

7,171

5,3075,688

6,407

7,885

6,952

Q2(749)

Q2(1,015)

Q3(876)

PwC2

Total equity investments into venture-backed companies

Page 3: Q3 2011 MoneyTree Report

The Software industry received the highest level of funding for all industries with $2.0 billion invested during the third quarter of 2011. This level of investment represents a 23 percent increase in dollars, compared to the $1.6 billion invested in the second quarter, and the highest quarterly investment in the sector since the fourth quarter of 2001. The Software industry also had the most deals completed in Q3 with 263 rounds, which represents a one percent decrease from the 267 rounds completed in the second quarter of 2011.

The Biotechnology industry was the second largest sector for dollars invested with $1.1 billion going into 96 deals, falling 18 percent in dollars and 20 percent in deals from the prior quarter. The Medical Devices and Equipment industry also experienced a decline, dropping 18 percent in Q3 to $728 million, while the number of deals declined 21 percent to 74 deals. Overall, investments in the Life

Sciences sector (Biotechnology and Medical Devices) fell 18 percent in dollars and 21 percent in deals, dropping to the second lowest quarterly deal volume since the first quarter of 2005. To the contrary, Healthcare Services investments surged with $152 million going into 11 deals, a 200 percent increase in dollars and 38 percent increase in deal volume over the second quarter.

Investment in Internet-specific companies fell in the third quarter to $1.6 billion going into 231 deals. This level of investment represents a 33 percent decrease in dollars and a 21 percent decrease in deals from the second quarter when $2.4 billion went into 292 deals, a ten-year high. The Clean Technology sector saw a 13 percent decrease in dollars to $891 million in Q3 from the second quarter when $1.0 billion was invested. The number of deals completed in the third quarter also declined nine percent to 80 deals compared with 88 deals in the second quarter.

Grand Total

0 500 1,000 1,500 2,000# of

Deals

0 15,000 20,000

($ in millions) All results rounded

($ in millions) All results rounded

10,0005,000

226 267 263

111 120

96

65 90 75

93 94 74

74 139 112

75 87 79

19 35 27

392626

16 19 20

16 8

11

7 19 10

37 30 34

1223 7

22 25 15

18 17 11

15 14

9

5 2 7

Software

Biotechnology

Media and Entertainment

Consumer Products and Services

Semiconductors

Other

Medical Devices and Equipment

IT Services

Industrial/Energy

Telecommunications

Business Products and Services

Electronics/Instrumentation

Networking and Equipment

Computers and Peripherals

Financial Services

Retailing/Distribution

Healthcare Services

Q3 2010

Q2 2011

Q3 2011

$1,120 $1,627

$2,008 $855

$1,319 $1,079

$429 $804

$749 $625

$893 $728

$284 $767

$682 $523

$790 $547

$110 $431

$209 $266

$325 $183

$78 $120

$152

$190 $51

$152 $108

$130 $126

$386 $174

$89

$89 $115

$72

$79 $123

$59 $68

$89 $56

$93 $115

$55

$4 $11 $6

$5,307 $7,885

$6,952

850 1,015

876

Investments by industry Q3 2010, Q2 2011, and Q3 2011

Definitions of the Industry categories can be found on the MoneyTree™ Web site at www.pwcmoneytree.com

3MoneyTreeTM Report

Page 4: Q3 2011 MoneyTree Report

Seed stage investments fell 56 percent in dollars and 26 percent in deals with $179 million invested into 89 deals in the third quarter. Early stage investments also fell seven percent in dollars and six percent in deals with $2.0 billion going into 341 deals. Seed/Early stage deals accounted for 49 percent of total deal volume in Q3, compared to 48 percent in the second quarter. The average Seed deal in the third quarter was $2.0 million, down from $3.3 million in the second quarter. The average Early stage deal was $5.7 million in Q3, down from $5.8 million in the prior quarter.

Expansion stage dollars increased two percent in the third quarter, with $2.5 billion going into 260 deals. Overall, Expansion stage deals accounted for 30 percent of venture

deals in the third quarter, up from 26 percent in the second quarter of 2011. The average Expansion stage deal was $9.6 million, up from $9.2 million in the prior quarter.

Investments in Later stage deals decreased 20 percent in dollars and 30 percent in deals to $2.3 billion going into 186 rounds in the third quarter. Later stage deals accounted for 21 percent of total deal volume in Q3, compared to 26 percent in Q2 when $2.9 billion went into 265 deals. The average Later stage deal in the third quarter was $12.5 million, which increased from $11.0 million in the prior quarter and represents the largest average deal size for Later stage companies since the third quarter of 2001.

# ofDeals

Seed

Early Stage

Expansion

Later Stage

0 5,000 10,000 15,000 20,000 25,000# of

Deals($ in millions) All results rounded

Grand Total

($ in millions) All results rounded

0 1,000 2,000 3,000 4,000 5,000 7,000 8,0006,000 9,000

Q2 2011

Q3 2010

Q3 2011

$304 93 121 89

291 363 341

246 266 260

220 265 186

8501,015

876

$403$179

$1,294$2,113

$1,957

$1,740$2,455$2,497

$1,969$2,914

$2,320

$5,307$7,885

$6,952

Investments by stage of development Q3 2010, Q2 2011 and Q3 2011

Definitions of the Stage of Development categories can be found on the MoneyTree™ Web site at www.pwcmoneytree.com

PwC4

Page 5: Q3 2011 MoneyTree Report

Definitions of the Financing Sequence categories can be found on the MoneyTree™ Web site at www.pwcmoneytree.com

First-time financing (companies receiving venture capital for the first time) dollars decreased 22 percent and the number of deals fell 18 percent with $1.2 billion going into 269 deals. First-time financings accounted for 17 percent of all dollars and 31 percent of all deals in the third quarter, compared to 20 percent of all dollars and 32 percent of all deals in the second quarter of 2011.

Companies in the Software, Media & Entertainment, and IT services sectors received the most first time rounds in the third quarter. There was a significant decline in the number and dollar level of first time rounds in the Life Sciences sector. The average first-time deal in the third quarter was $4.5 million, down slightly from $4.7 million in the prior quarter. Seed/Early stage companies received the bulk of first-time investments, garnering 74 percent of the deals.

# ofDeals

First

Second & Third

Fourth, Fifth, & Sixth

Seventh & Beyond

0 5,000 10,000 15,000 20,000 25,000# of

Deals

$1,263$1,552

($ in millions) All results rounded

Grand Total

($ in millions) All results rounded

Q2 2011

Q3 2010

Q3 2011

0 1,000 2,000 3,000 4,000 5,000 7,0006,000 8,000

$1,208

$1,562$2,160

$1,978

$1,469$2,611

$2,054

$1,013$1,561

$1,713

262 327 269

256 308 278

204 247 196

128 133 133

8501,015

876

$5,307$7,885

$6,952

Investments by sequence of financing Q3 2010, Q2 2011, and Q3 2011

5MoneyTreeTM Report

Page 6: Q3 2011 MoneyTree Report

Silicon Valley received the highest level of funding for all regions with $2.7 billion invested during the third quarter. This level of investment represents a 13 percent decrease in dollars, compared to the $3.1 billion invested in the second quarter of 2011. New York Metro was the second largest region for dollars invested with $891 million going into 103 deals, rising 33 percent from the prior quarter. Texas investment jumped 113 percent in the third quarter, propelled by two large deals in the Biotechnology and Clean Technology spaces. Conversely, funding going to New England was down 45 percent with $586 million going to 108 deals.

Investments by region Q3 2010, Q2 2011, and Q3 2011

242 337 273

87 104 103

46 44 38

102 120 108

42 60 51

36 36 42

65 78 57

604545

35 46 32

32 32 21

21 23 24

36 29 36

13 18 14

17 16 13

5 7 5

4 2 1

5 17 12

2 1 1

850 1,015

876

Silicon Valley

NY Metro

Texas

New England

LA/Orange County

Northwest

Midwest

Southeast

DC/Metroplex

San Diego

Colorado

Philadelphia Metro

North Central

SouthWest

Upstate NY

Sacramento/N.Cal

South Central

AK/HI/PR

Grand total

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000# of

Deals

0 3,000 8,000

($ in millions) All results rounded

($ in millions) All results rounded

5,000 6,000 7,0004,0001,000 2,000

$2,054$3,053

$2,668

$345 $671

$891

$375$280

$596

$506$1,059

$586

$242$616

$401

$228$164

$304

$282$423

$280

$344$293

$242

$268$358

$237

$202$213$202

$94

$158

$126$89

$120

$149$98$116

$73$256

$105

$4$49

$24

$5$28$16

$5$26

$6

$500

$5,307

$6,952

$208

$7,885

Q3 2010

Q2 2011

Q3 2011

Definitions of the Region categories can be found on the MoneyTree™ Web site at www.pwcmoneytree.com

Unknown region totals not included

PwC6

Page 7: Q3 2011 MoneyTree Report

New Enterprise Associates was the most active investor for the quarter. Kleiner Perkins Caufield & Byers and First Round Capital followed with 23 and 22 deals respectively. The most active venture investors took part in 18 percent of total venture-backed deals in the third quarter. Most active are those investors who participated in 9 or more deals.

Q3 2011 most active venture investors

Firm City # of deals

New Enterprise Associates, Inc. Menlo Park, CA 27Kleiner Perkins Caufield & Byers Menlo Park, CA 23First Round Capital West Conshohocken, PA 22Sequoia Capital Menlo Park, CA 16Intel Capital Santa Clara, CA 15US Venture Partners Menlo Park, CA 15Accel Partners Palo Alto, CA 14InterWest Partners Menlo Park, CA 14Google Ventures Mountain View, CA 13Rho Capital Partners, Inc. New York, NY 13General Catalyst Partners Cambridge, MA 12Polaris Venture Partners Waltham, MA 12

August Capital Management Menlo Park, CA 11

Canaan Partners Westport, CT 11

Kansas Technology Enterprise Corporation Topeka, KS 11

Firm City # of deals

Lightspeed Venture Partners Menlo Park, CA 11Menlo Ventures Menlo Park, CA 11Advanced Technology Ventures Waltham, MA 10Battery Ventures, L.P. Waltham, MA 10Foundation Capital Menlo Park, CA 10Greylock Partners Cambridge, MA 10Matrix Partners Waltham, MA 10Mayfield Fund Menlo Park, CA 10Mohr Davidow Ventures Menlo Park, CA 10Sutter Hill Ventures Palo Alto, CA 10ARCH Venture Partners Chicago, IL 9Ignition Partners Bellevue, WA 9North Bridge Venture Partners San Mateo, CA 9Norwest Venture Partners Palo Alto, CA 9Oak Investment Partners Westport, CT 9

7MoneyTreeTM Report

Page 8: Q3 2011 MoneyTree Report

PricewaterhouseCoopers and the National Venture Capital Association have taken responsible steps to ensure that the information contained in the MoneyTreeTM Report has been obtained from reliable sources. However, neither of the parties nor Thomson Reuters can warrant the ultimate validity of the data obtained in this manner. Results are updated periodically. Therefore, all data is subject to change at any time. Before making any decision or taking any action, you should consult a competent professional adviser.

pwc.com © 2011 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. PM-12-0109

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Contacts

Tracy T. Lefteroff Global Managing Partner Venture Capital Practice [email protected]

David Silverman Emerging Company Services Practice Co-lead [email protected]

Danny Wallace Emerging Company Services Practice Co-lead [email protected]

Deborah Volpe MoneyTree Project Manager [email protected]