If there were any doubts that entrepreneurial activity is hitting new highs, then new data from the National Venture Capital Association puts them to rest — venture capitalists invested $6.5 billion in 906 deals during the second quarter of 2010, thanks to a renewed interest in seed- and early-stage companies along with newfound enthusiasm for clean technology–oriented startups. This is in sharp contrast to a slowdown in the new money flowing into venture funds themselves.
In the first half of 2010, venture capital (VC) investments totaled $11.4 billion going into 1,646 deals, a 49 percent increase in dollars and a 23 percent increase in deals from the first half of 2009 when $7.7 billion was invested in 1,340 deals. [NVCA Press Release]
The data released by the NVCA and PricewaterhouseCoopers shows a sharp increase in seed- and early-stage companies in the April through June time frame. Such companies accounted for $2.3 billion in investments during the second quarter, while the actual number of seed- and early-stage deals jumped 32 percent to 429 compared to Q1 2010.
In fact, the sheer increase in first-time financings, aka companies receiving venture capital for the first time, is worth noting. First-time deals increased during the second quarter of this year by 27 percent compared to the the first quarter of 2010, with $1.1 billion going into 281 deals. Such first-time financings accounted for a whopping 31 percent of all deals in the second quarter, compared to 21 percent of all dollars and 30 percent of all deals in the first quarter of 2010. During the second quarter of 2009, first-time financings attracted $760 million.
Seed Stage Story
Seed- and early-stage companies received the bulk of first-time investments in Q2, garnering 63 percent of the dollars and 73 percent of the deals.
It is not a surprise — there has been a marked increase in the number of companies being funded in Silicon Valley these days. This increase in investment activity, especially around consumer web and mobile applications has been spurred on by the rise of super angels, who have emerged as a dominant new economic force in a rapidly changing startup ecosystem. The NVCA data confirms this trend. (Video: Angel Investor Chris Dixon on Startups and Why the VC Model is Broken.)
The average first-time deal in the second quarter was $4 million, which dropped from $4.7 million in the prior quarter, NVCA’s numbers show. First-time financings on an average garnered $4.96 million in 2008 and $4.34 million in 2009, indicating a slow decline in these deals. The data shows that during the second quarter of 2010, 77 Internet-only first-time deals brought in $180 million versus 56 deals that brought in $194 million during the first quarter of 2010.
Hollywood Shows Its Startup Game
About 276 Silicon Valley deals raised $2.92 billion in Q2 2010 versus 216 deals that raised $1.57 billion in Q1 2010. In New York, 93 deals garnered $382 million in the second quarter versus $583 million raised via 82 deals in the prior quarter. The New England region raised $582 million for 95 deals during the second quarter. Another region which saw a big bump — Los Angeles / Orange County: 67 deals ($687 million) in Q2 2010 versus 49 deals ($401 million) in Q1 2010, thanks to some active venture capitalists and angels.
There are no signs that investment activity is losing steam. Investors like Chris Sacca (watch his interview) are showing remarkable hunger for new Internet and mobile companies.
Related content from GigaOM Pro (sub req’d):
What the VC Industry Upheaval Means for Startups
Om,
Great post and interesting stats about seed-stage investing. We’ve been talking about the Seed VC phenomena for some time and have been speculating that Seed VC may be the new Series A. Liz’s post to this end highlighted some of our early work on this area: http://gigaom.com/2010/06/07/seed-deals-account-for-26-of-early-stage-web-investments/
The CB Insights’ Q2 2010 Venture Capital report issued a few days ago highlighted the seed trend along with a few other things which maybe of interest.
We found that early stage deals represent almost 42% of VC deals in the quarter (but only 18% of funding) indicating a trend we’ve been seeing for some time that VCs are doing more small deals. Seed VC has been a driver of this.
Internet investments hits a five quarter high with ecommerce in particular on track to exceed the investment levels seen during the heyday, e.g. 1999-2000.
We also saw decreasing geographic diversity for VC dollars and deals with Cali, Mass and NY taking 70% of money and 65% of deals. California on its own was over 50% of financing solidifying the state’s dominance of the VC industry.
For those interested in a very data-driven perspective on the Q2 2010 VC funding landscape, our 50 page downloadable report (it’s free) featuring trends, data and analytics on the quarter is available here:
http://www.cbinsights.com/blog/venture-capital/q2-2010-venture-capital-activity-5-9-billion-invested-over-612-deals
Hope this data-driven perspective may be useful/interesting.
Best,
Anand