VC Edge
3Q 2013
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GLOBAL OVERVIEW: 3Q’13 Key Trends Global venture capital investment activity saw slight decreases in the third quarter. Deal flow dropped 4%, from 1,380 to 1,323, while investment dipped 3% to garner $11 billion. Compared to the same period in 2012, investment raised 2% but deal flow was still lower. In 2013 so far, 3985 transactions have been completed raising $33 billion, a 6% decrease on both figures posted for the equivalent 2012 period. U.S. remained the most active region, with a 2% increase in investment: $8.1 billion from 806 venture
Inside this issue:
capital deals. Europe faced the sharpest investment decline (31%), while investment into Chinese and Israeli venture-backed companies registered a 59% and 21% investment rise, respectively.
Global Overview
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U.S. Overview 4-5 Israel Overview
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Europe Overview
8-9
China Overview
10-11
From an industry perspective, Information Technology (IT) received the largest allocation of investment, accumulating $3 billion. Business and Financial Services followed in second position with $2.8 billion, up 42% from 2Q’13. Healthcare and Consumer Services both shared third position, down 20% and 10% respectively, from the previous quarter. Companies within the energy and utilities remained flat, raising $400 million. This is a 3% uptick from 2Q’13 and 51% jump from 3Q’12. Median VC round size decreased globally.
Global VC Deal Flow and Investment in Decline in 3Q’13 Deal Flow & Equity into Canadian, Chinese, European, Indian, Israeli* & U.S. Venture-Backed Companies
*Israel HQ only
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U.S. Dominates Global Investment Allocation in 3Q’13 Equity Investment by Selected Regions into Venture-Backed Companies
IT Saw Largest Investment Allocation in 3Q’13 Equity Investment by Selected Industry Groups into Venture-Backed Companies
*Other: Consumer Goods and Industrial Goods & Materials
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Largest Deals per Industry Segment in 3Q’13 ($M USD) Beats Electronics LLC
U.S.
Electronics and Computer Hardware
$500
Uber Technologies Inc.
U.S.
Travel and Leisure
$361
Palantir Technologies Inc.
U.S.
Software
$197
MongoDB Inc.
U.S.
Business Support Services
$150
Oyster Petroleum Ltd.
UK
Non-Renewable Energy
$150
3Bear Energy LLC
U.S.
Non-Renewable Energy
$127
Shanghai 2345 Network Technology Co. Ltd.
China
Consumer Information Services
$124
Evolent Health Inc.
U.S.
Healthcare Services
$100
Anaqua Inc.
U.S.
Software
$100
Telogis Inc.
U.S.
Business Support Services
$93
3Q’13 Most Active Investors by Region U.S.
Israel
Europe
China
Google Ventures
Pitango Venture Capital
High-Tech Gruenderfonds Management GmbH
IDG Capital Partners
Sequoia Capital
Lool Ventures
Seed Capital Management I/S
Shenzhen Capital Group Co. Ltd.
Andreessen Horowitz
Wadi Ventures
Bpifrance Investment
GGV Capital
Kleiner Perkins Caufield & Byers
Globespan Capital Partners
Index Ventures
Morningside Group (Holdings) Ltd.
New Enterprise Associates
Infinity Group
Enterprise Ireland
Shanghai Zhonglu Group Co.
Equity Investment by Round Class into Chinese, European, Israeli, and U.S. Venture-Backed Companies in 3Q’13
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VC Edge
U.S. OVERVIEW Venture capital investment was at its highest since 2Q’12 when 981 deals garnered $9 billion. U.S.-based companies raised $8.1 billion from 806 venture capital deals in 3Q 2013, a 2% increase in capital and a 4% decrease in deal count from the previous quarter. Compared to the same period in 2012, a 10% decrease was registered in number of deals, while amount raised rose 4%. Business and Financial Services (46%) and Consumer Services (1%) were the only two sectors to register quarterover-quarter increases in capital. IT saw the largest investment allocation, with 246 deals garnering $2.3 billion and accounting for 28% of total equity investment. However, the sector reported a drop in amount invested both quarter-over-quarter (2%) and yearover-year (3%). Business and Financial Services registered the highest quarter-over-quarter amount increase (46%), accumulating $2.2 billion through 195 deals. Healthcare placed third with $1.8 billion in 164 deals. The sector reported a 12% drop in investment and a 7% decrease in number of deals. $1.3 billion was raised by Consumer Services companies through 148 deals, a 10% decline in deal flow, while invested capital inched up just 1%. Later round investments attracted the majority of VC dollars: $4.5 billion into 254 deals. From a regional point of view, the Bay Area maintained lead and venture capital invested rose 7% compared to last quarter: $3.2 billion versus $3 billion. Deal flow dipped 3%, at 269 transactions. Median round size decreased 16% from 2Q’13 but increased 4% from the same period last year.
U.S. Investment On the Rise in 3Q’13 Deal Flow and Equity into U.S. Venture-Backed Companies
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IT Dominates 3Q’13 Equity Investment by Selected Industry Groups into U.S. Venture-Backed Companies
*Other: Consumer Goods and Industrial Goods & Materials
Bay Area Draws Most Investment Dollars in 3Q’13 Regional Investment in the U.S.
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VC Edge
ISRAEL OVERVIEW Venture-backed Israeli companies secured $307 million in the third quarter of 2013, a 50% fall in amount raised when compared to 2Q’13, when $619 million was raised. Deal flow also dropped 10% with 37 closed deals, from 41 in 2Q’13. Comparing third quarter figures to those posted during the same period last year, 3Q’13 capital invested rose 3% and deal count registered a 5% decrease. IT remained the strongest sector for venture capital in Israel. Venture capitalists put $104 million into 16 deals. Nonetheless, capital injection into the IT sector dropped 80% from 2Q’13. The strongest segment was software: $87 million that accounted for 28% of total VC dollars. The industry goods and materials sector placed second with the company Kaiima Agro-biotech Ltd., in the Agriculture and Forestry segment, raising $65 million in its fourth round. Companies in the business and financial services sector garnered $56 million, a 29% fall from the previous quarter. Deal flow also experienced a decline: just eight deals closed, almost half of the respective 2Q’13 figure. Taking 16% of overall investment, healthcare attracted $50 million, up 286% from the $13 million invested the quarter before. Energy and utilities and consumer goods did not complete any transaction. Later stage rounds took the lion’s share of capital invested (59% with $171 million), a 62% drop from the previous quarter. First rounds came second and totaled 27% with $78 million. Median round size (Israeli-HQ only) decreased both quarter-over-quarter (12%) and year-over-year (33%).
Israeli Investment Fell in 3Q’13 Deal Flow and Equity into Israeli Venture-Backed Companies
Powered by Dow Jones VentureSource IT Gets Lion’s Share in Amount Invested During 3Q’13 Equity Investment by Selected Industry Groups into Israeli Venture-Backed Companies
*Other: Consumer Goods and Industrial Goods & Materials
Later Stage Companies Dominate in 3Q’13 Equity Investment by Round Class into Israeli Venture-Backed Companies
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VC Edge
EUROPE OVERVIEW Venture capital investment into European companies experienced a quarter-over-quarter decline. European companies raised €1.13 billion via 319 deals during 3Q’13, a 12% fall in activity and a 32% decline in capital raised versus last quarter. In contrast with 3Q‘12, deal flow experienced a 7% uptick, while investment dipped 1%. The business and financial services sector received the largest allocation of investment (26%), accumulating €294 million through 81 deals, an increase of 33% from 2Q’13 in investment and 7% in number of deals. Healthcare held on to second position in terms of equity financing, taking a 21% share of all 3Q’13 investment. The sector raised €243 million across 39 deals, falling 44% and 46% from respective 2Q’13 figures. The consumer services sector occupies third position, with companies gathering a 20% share of the total amount invested during the quarter. This sector received €228 million across 101 deals, an uptick of 3% in deal flow but a drop of 45% in capital raised from 2Q’13. The IT sector saw its share of investment fall from 28% in 2Q’13 to 12% in 3Q’13. Companies in this segment completed 65 deals for a total of €131 million, an 11% decline in deal flow and 72% decline in capital from last quarter. The U.K. reclaimed its position as the favoured destination for equity financing during 3Q’13 with a 48% share of all investment into European VC-backed companies. The country received €545 million across 94 deals, up 147% and 21% from respective 2Q’13 figures. France rose one place to second, despite capital and deal flow dipping by 11% and 29% respectively from the previous quarter. The country received €183 million through 51 deals, representing a 16% share of all 3Q’13 investment. Germany dropped to third raising €135 million, a 12% share of investment. This represents the lowest quarterly amount for the country since 3Q’11. Median round size fell 21% and 5%, compared to 2Q’13 and 3Q’12 respectively.
Negative Quarter-over-Quarter Decrease for European Companies Deal Flow and Equity into European Venture-Backed Companies
Powered by Dow Jones VentureSource Deal Flow Continue to Decline in 4Q’12
Business and Services Leads 3Q’13 Investment Allocation Deal Flow andFinancial Equity into Mainland Chinese Venture-Backed Companies
Equity Investment by Selected Industry Groups into European Venture-Backed Companies
*Other: Consumer Goods and Industrial Goods & Materials
UK Takes Majority of European Investment 3Q’13 Capital Raised in Europe by Country
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VC Edge
CHINA OVERVIEW Investment into Chinese venture-backed companies improved in 3Q’13, as companies raised $765 million from 77 deals. The gains mark a 59% increase in capital and a 28% rise in deal activity from the previous quarter. Compared to 3Q’12, deal flow improved by 45% but investment declined by 16%. So far in 2013, Chinese venture-backed companies have raised a total of $1.74 billion through 175 deals, down 48% in capital and down 5% in deal activity when compared to the first nine months of 2012. Consumer services, one of three sectors to see gains in dollars from last quarter, placed first in terms of investment received. This sector raised $421 million via 25 deals during 3Q’13, up 131% and 9% from respective figures for the previous quarter, equating to a total investment share of 55%. The information technology group raised the second highest proportion of investment for 3Q’13. IT companies drew in $278 million across 35 deals, representing a 36% investment share for the quarter and a significant 213% and 75% increase in capital raised and deals, respectively, compared to last quarter. Business and financial services companies received $35 million through 10 deals during 3Q’13, an uptick of 9% and 67% in dollars raised and deals completed from 2Q’13 figures. The sector’s investment figure represents a 5% share of total equity investment into Chinese VC-backed companies for the period. Receiving a 3% investment share, the healthcare sector posted $23 million across four deals, dropping significantly from the $158 million accumulated in seven deals during 2Q’13. Companies in the energy and utilities sector failed to attract any investment for the fourth consecutive period. Median round size dropped 6% quarter-over-quarter and 45% year-over-year.
Venture Capital Investment Increases in 3Q’13 Deal Flow and Equity into Mainland Chinese Venture-Backed Companies
Powered by Dow Jones VentureSource Deal Flow Continue Decline in 4Q’12 Consumer ServicestoGains First Position in 3Q’13
Deal Flow and Equity Mainland Chinese Venture-Backed Equity Investment by into Selected Industry Groups into MainlandCompanies Chinese Venture-Backed Companies
*Other: Consumer Goods and Industrial Goods & Materials
Companies Generating Revenue Dominate in 3Q’13 Equity Investment by Development Stage into Mainland Chinese Venture-Backed Companies
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About Dow Jones VentureSource Dow Jones VentureSource is a data source in DJX, Dow Jones’ flagship news and analytics platform. VentureSource helps venture capitalists, corporate development executives, investment bankers and service providers find deal and partnership opportunities, perform comprehensive due diligence and examine trends in venture capital investment, fund-raising and liquidity. It provides accurate, comprehensive data on venture-backed companies – including their investors and executives – in every region, industry and stage of development throughout the world. The investment figures included in this release are based on aggregate findings of Dow Jones' proprietary research and are contained in VentureSource. This data was collected by surveying professional firms, interviews with company executives, and from secondary sources. These venture capital statistics are for equity investments into early stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. Figures contained throughout the report current at time of editorial but subject to change without notice. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.
Research: Victoria Bradley, Micaella Cabral, Jonathan Cohen, Sean Curran, Chrystle De Leon, Matt Farguson, Dani Feng, Matthew Fleming, Lisa Fong, Ivy Guo, Angelo Iacovella, Brendan Hughes, Karen Liu, Anne Malterre, Cyril Neant, Cynthia Nonnenmacher, Toivo Rehemets, Larissa Runkle, Johanna Saenz, Adrianne Saltzmann, Ai Sato, Sarah Scritchfield, Monica Sherwood, Rodnie Tauro, Daniel Wang, Ruoying Wang, Yimeng Wang, Aggie Wong, Yulia Xian, Irene Yao, Jessica Yao, Coco Zhu, Jiayao Zhu, Julia Zhu, Skyey Zhu Editorial: Sarah D’Intino | Acknowledgements: Nina Kuzmina, Lucia Lopez, Patricia Ortiz, Corinna Raschick, Laura Salazar, Atsuko Shinoda, Christine Thygesen, Felix Xue Research Contact: Valerie Foo, Valerie.Foo@dowjones.com Media Contact: Erin Carpenter, Erin.Carpenter@dowjones.com COPYRIGHT ©2013 Dow Jones and Company Inc. All rights reserved. FOR PRODUCT INFORMATION Call: 877-633-8663 Visit: www.pevc.dowjones.com Email: privatemarkets.sales@dowjones.com