Dow Jones VentureSource 3Q’14 U.S. Venture Capital Report

The following report presents Dow Jones VentureSource’s quarterly findings for U.S. venture capital fundraising, investment, valuation, and liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market.

Highlights for 3Q 2014 include:

U.S. venture capital fundraising amount raised on decline from 2Q 2014;
Venture capital investment on decline in 3Q 2014;

Median pre-money valuation totaled $30M, a 42% decrease from the valuation figure for 2Q 2014;

While venture-backed mergers and acquisitions (M&As) amount raised and transactions experienced an increase, initial public offerings (IPOs) still on decline.

FUNDRAISING

Venture Fundraising in U.S. on decline from 2Q 2014

81 funds garnered $6.5 billion in 3Q 2014, down 16% from the amount raised in the previous quarter, while
number of funds stayed flat.

JP Morgan Digital Growth Fund II LP was the largest U.S. venture capital fund of 3Q 2014, raising $996 million and accounting for 15% of the total amount raised during the quarter.

Median U.S. fund size was $119 million in the three quarters of 2014.

FINANCING

U.S. Venture Investment on Decline in 3Q 2014

U.S.-based companies raised $11 billion from 899 venture capital deals during 3Q 2014, a 24% and 7% decrease in capital and deal count, respectively, from the previous quarter.

Compared to the same period in 2013, amount invested registered a 16% increase, while number of deals dipped 5%.
Business and Financial Services and Healthcare were the strongest sectors, respectively with 27% and 25% share of total amount invested.

FINANCING

Equity Financings into U.S.-based, VC-backed Companies, by Industry Group (3Q 2014)

The Business and Financial Services sector saw the largest investment allocation, with 247 deals garnering $3 billion and accounting for 27% of total equity investment.

Healthcare raised the second highest proportion of investment for 3Q’14 - $2.7 billion into 182 deals, down 17% and 15% in dollars and deals, respectively, from 2Q’14 figures.

Consumer Services occupies third position. Amount raised decreased 41% quarter over quarter, with $2.3 billion invested in 173 deals, a 3% drop also for the number of deals. The sector’s investment figure represents a 21% share of total equity investment into U.S. VC-backed companies for the quarter.

IT companies raised $2.1 billion across 221 deals, a 31% and 9% decrease compared to the previous quarter.

LIQUIDITY

Venture M&A and IPO Market Activity in the U.S. during 3Q 2014

Mergers and acquisitions (M&As) of venture-backed companies in 3Q 2014 increased by 73% in value from those completed in 2Q 2014, with 127 deals garnering $20 billion.

22 venture-backed IPOs took place during 3Q 2014, a 12% decrease from the previous quarter.

U.S. VC-backed M&As (2011-2014)

127 M&As of venture-backed companies in U.S. garnered $20 billion during 3Q 2014.

In contrast with 2Q 2014, when a total of 119 transactions accumulated almost $12 billion, both number of M&As and amount raised increased by 7% and 73% respectively.

The largest M&A of the quarter was Beats Electronics LLC, which was acquired by Apple Inc. (Nasdaq: AAPL) for $2.5 billion.

U.S. VC-backed IPOs (2011-2014)

22 venture-backed companies raised $1.3 billion through public offerings in 3Q 2014. Number of deals decreased by 12% and capital raised also registered a 40% decrease from the previous quarter.

The largest IPO of the quarter was HealthEquity Inc. (NASDAQ: HQY), which completed a $127 million IPO.