Highlights of the third quarter are:
• With the exception of the latest quarter, the private equity benchmark outperformed U.S. public markets in all of the time periods ending September 30, 2010 listed in the table above. The venture capital index’s record against the public markets over the past ten years remained mixed; venture’s long-term results eclipse those of the public markets.
• The 2003 private equity and 1999 venture capital funds were the best performing among the top-sized vintages for the quarter in their respective indices.
• The spread between the private equity and venture capital ten-year returns continued to widen in the third quarter, moving to 12.7% from 11.5% as of the second quarter.
• Private equity funds called and distributed more capital in the third quarter than they did in the second; private equity distributions increased by nearly $3.5 billion while LP contributions rose by less than $1.0 billion. Among venture funds, capitals calls and distributions dropped slightly.
• Fund managers in the private equity index distributed nearly three times as much capital in the first three quarters of 2010 as they did in all of 2009.
• All sectors that represented at least 5% of the private equity index produced positive results for the quarter; information technology (IT) led all sectors, large and small.
• Private equity fund investments were spread among a wide range of sectors during the third quarter. Healthcare companies attracted the most capital, about 22% or roughly twice the longterm average for the sector.
• The ten-year return for the venture capital index fell again in the quarter ending September 30, 2010, falling 0.4% from where it was as of June 30, 2010 and about 13.0% from where it was as of the third quarter in 2009.
• Software earned the best return of the top three sectors by size in the venture index, edging out IT by about 0.4%. Hardware was the best performing among all sectors.
• At the end of a strong quarter for the public markets, based on market values at September 30, 2010, public companies accounted for more of the private equity and venture capital indices than they did in the second quarter. At 11.6% and 10.4% of the respective indices, the percentage increase was almost 0.5% in the private equity index and nearly 1.5% in the venture capital index. There were small increases in the percentage of both indices represented by companies based outside of the U.S.
Private Equity Performance Insights
Public markets rebounded during the third quarter, with equity indices globally rising by more than 10%. Despite falling short of the public markets, the Cambridge Associates LLC U.S. Private Equity Index® extended its positive quarter streak to six with a 5.1% third quarter return; its performance for the first nine months of 2010 was 11.4%. Valuations improved for assets held by funds in all vintage years from 2000 to 2009, and the six vintages that represented at least 5% of the index all saw assets increase in value by more than $1.0 billion. In dollar terms, company valuations grew most for energy and consumer businesses; among the top-sized sectors in the index, manufacturing and media increased by the largest and a virtually equal amount in percentage terms.
The private equity index’s top vintage years by size, 2006, 2005, 2007, 2004, 2000, and 2003 represented nearly 84% of the index’s value in the third quarter. Results for the group were much better in the third quarter than in the second, ranging from 4.4% for the 2007 funds to 6.9% for the 2003 funds. In funds from the largest vintage year, 2006, company valuations across all sectors increased with energy, retail, and IT leading the way. Similarly, the 2005 funds’ portfolio companies rose in value virtually across the board; energy, consumer, healthcare, and manufacturing accounted for roughly 75% of the increases. The energy and consumer sectors also buoyed results for the third largest vintage, 2007, while lower valuations in hardware dampened returns. The 2004 funds, unlike the other large vintages, experienced their largest write-ups in the manufacturing sector, with other large sectors also contributing significantly to gains. The quarter’s best return, earned by the 2003 vintage, was due mostly to increased valuations and realizations of energy investments. Energy represents a larger than average portion of the investments in the vintage year 2003 funds because the sample includes a number of energy focused funds.
All Eight Key Sectors in the PE Index Earned Positive Returns for the Quarter, with IT Eking Out Energy for the Best Performance Among Sectors
During the third quarter, all eight sectors that represented at least 5% (“meaningfully sized”) of the index produced a positive return. The three largest sectors by asset value – consumer, healthcare, and energy – comprised slightly more than half of the index’s total value and returned between 4.6% and 8.7%. Energy performed the best followed by consumer and healthcare which produced nearly the same returns. On a dollar-weighted basis the three earned 5.7%, slightly underperforming the total benchmark on a gross basis. Among the eight meaningfully-sized sectors, information technology posted the highest return, 9.0%, which was driven by funds raised in 2004 and 2006; while software produced the lowest return, 4.4%. During the quarter, fund managers invested more than 20% in healthcare companies – the most out of the eight meaningfully sized sectors.
In the third quarter, managers in the U.S. private equity index called just over $20.0 billion from limited partners and returned nearly $16.7 billion – representing a 5.2% increase in contributions and a 28% increase in distributions from last quarter. Capital calls rose by almost $1.0 billion, reaching their highest level since the same quarter of 2008. Distributions hit their highest level since the third quarter of 2007 with an increase of roughly $3.7 billion over last quarter. Investors in funds launched in 2006 and 2007 contributed $17.0 billion, or 85% of the total capital called during the quarter, while investors in funds launched in 2000, 2004 and 2006 received approximately $9.1 billion or 54% of the capital distributed.
Contributions Increased Two Times as much as Distributions in the Quarter
Contributions have outnumbered distributions in every quarter since the second quarter of 2007, during which time private equity funds have called 1.9 times as much capital as they distributed. The gap between contributions and distributions narrowed in the third quarter after widening the quarter before. Investment activity remained fairly constant in the third quarter as credit availability continued to move towards pre-recession levels. Exits picked up at a faster pace than investments, and there was some speculation that exit activity in the second half of 2010 was related to potential changes to the U.S. tax code. Cambridge Associates derives its U.S. private equity benchmark from the financial information contained in its proprietary database of private equity funds. As of September 30, 2010, the database comprised 861 U.S. buyouts, private equity energy, growth equity, and mezzanine funds formed from 1986 to 2010, with a value of roughly $433 billion. Ten years earlier, on September 30, 2000, the index included 394 funds whose value was nearly $133 billion.
Venture Capital Performance Insights
Venture capital performance and most industry fundamentals improved in the third quarter of 2010. For the fifth quarter in a row, valuations for venture-backed companies rose. While there were fewer exits through IPOs, on average, offering prices were higher than those in the quarter before. M&A, the number of deals with disclosed values, and deal values all increased. The only slow down was in capital calls and distributions, which were down from the prior quarter, with a much steeper drop in calls than in distributions. According to the National Venture Capital Association (NVCA) and Thomson Reuters, during the third quarter, 14 venture-backed companies went public and the IPOs were worth close to $1.25 billion; both figures represented slight decreases from the second quarter, when 17 IPOs raised just under $1.3 billion. M&A increased, from 99 in the second quarter to 111 in the third. The values of 30 deals in the third quarter were disclosed to the public, up from 23 in the previous quarter. Based on the publicly available values, the average size of transactions rose from $131 million to $134 million.
VC Index Performance Much Better Than in Previous Three Quarters; Funds Raised in 1999 Performed Best
The Cambridge Associates LLC U.S. Venture Capital Index® rose far more in the third quarter, 3.7%, than in any of the previous three, bringing its performance from January through September up to 4.8%. The VC index has grown less concentrated, and in the third quarter nine vintage years represented at least 5.0% of the index; all nine had positive quarters. The largest vintage, 2000, represented slightly less than 20%, down from nearly 24% a year earlier. The top four vintage years by size have remained constant, 2000, 2006, 2005, and 2004, and they accounted for 56.5% of the benchmark. With a 7.5% quarterly return, the funds raised in 1999 earned the best return among the nine vintages that made up the bulk of the index’s value. Increased valuations for IT and higher values plus realizations from healthcare drove the 1999 group’s results. Assets in the 2000 vintage year funds increased in value by over $1 billion in the quarter; write-ups were dominated by software, hardware, IT, and healthcare. The 2001 and 2006 vintages tied for the worst return for the quarter. Both saw values go up modestly; software helped the 2001 group most, while healthcare boosted the 2006 funds’ performance.
Software Takes Lead from IT for the first time in Four Quarters
During the third quarter of 2010, all meaningfully-sized sectors produced positive returns. The venture capital index continued to be fairly concentrated by sector, with the top three – healthcare, IT, and software – comprising nearly 75%. Third quarter returns for the three sectors ranged from healthcare’s 3.5% to software’s 7.7%, marking the first quarter in four when IT did not dominate returns among all sectors. On a dollar-weighted basis, healthcare, IT, and software companies earned a combined gross return of 5.9%, slightly outperforming the benchmark’s company-level return of 5.5%. Funds raised in 2000 helped software return the most out of the meaningfully sized industries; while media’s low return was not overly influenced by any specific vintage year.
VC Calls and Distributions Fell from Prior Quarter Levels
In the third quarter, managers in the U.S. venture capital index called just over $2.7 billion and distributed roughly $2.3 billion to their investors. Contributions decreased by $836 million or 23.6% and distributions fell by $257 million or 9.9% from the previous quarter. Investors in funds raised between 2006 and 2008 called nearly $1.6 billion or 57.7% of the total capital called. The 2007 and 2008 vintage years funds called roughly $1.2 billion which represented 42.5% of the total. On the other hand, investors in vintage years 2000 and 2005 received approximately $1.1 billion in distributions or 47.5% of the total distributed.
IT Sector Led Again in M&A Activity
Of the 14 IPOs in the third quarter, ten were IT or biotech companies. By number, IT companies accounted for about 79% of the M&A in the quarter, with most involving either Internet or software companies. After three strong quarters, M&A was well on its way to a record setting year. Cambridge Associates derives its U.S. venture capital benchmark from the financial information contained in its proprietary database of venture capital funds. As of September 30, 2010, the database comprised 1,290 venture funds formed from 1981 through 2010 with a value of approximately $101 billion. Ten years earlier, on September 30, 2000, the index included 793 funds whose collective value was almost $125 billion.
About Cambridge Associates and the Indices
Founded in 1973, Cambridge Associates delivers investment consulting, independent research, performance monitoring services, and outsourced portfolio solutions to over 900 institutional investors and private clients worldwide. Cambridge Associates has advised its clients on alternative assets since the 1970s and today serves its clients with more than 180 professionals dedicated to consulting, research, operational due diligence, and performance reporting on these asset classes. The firm compiles the performance results for more than 4,200 private partnerships and their more than 59,000 portfolio company investments to publish its proprietary private investments benchmarks, of which the Cambridge Associates U.S. Venture Capital Index® and Cambridge Associates U.S. Private Equity Index® are widely considered to be the industry-standard benchmark statistics for these asset classes. The firm also compiles benchmark statistics for global private equity and venture capital, real estate, natural resources, distressed securities, and funds of funds and secondaries. Cambridge Associates has over 1,000 employees serving its client base globally and maintains offices in Arlington, VA; Boston, MA; Dallas, TX; Menlo Park, CA; London, England; Singapore, and Sydney, Australia. The firm has plans to open an office in Beijing in the summer of 2011. For more information about Cambridge Associates, visit www.cambridgeassociates.com.
Cambridge Associates LLC compiles its proprietary benchmarks with the goal of providing independent statistics to the institutional investment industry. The venture capital data is used by the National Venture Capital Association (NVCA) for its quarterly benchmarks. The Cambridge Associates LLC U.S. Venture Capital Index® is based on performance data compiled for funds that represent the majority of the institutional capital raised by venture capital partnerships from 1981 through 2010. Similarly, the Cambridge Associates LLC U.S. Private Equity Index® is based on returns data compiled for leveraged buyouts, subordinated debt, and special situations funds that represent the majority of institutional capital raised by private equity partnerships formed from 1986 through 2010. The pooled means represent the net end-to-end rates of return calculated on the aggregate of all cash flows and market values as reported to Cambridge Associates by the funds’ general partners in their quarterly and annual audited financial reports. These returns are net of management fees, expenses, and performance fees that take the form of a carried interest. Both the Cambridge Associates LLC U.S. Venture Capital Index® and the Cambridge Associates LLC U.S. Private Equity Index® are reported each week in Barron’s Market Laboratory section.
Monday, February 28, 2011
Returns on Private Equity and Venture Capital Funds in the Third Quarter of 2010 Sharply Improved over the Prior Quarter
Both Asset Classes Extended Streak of Positive Returns to Six Consecutive Quarters
Strong public market performance and a gradually improving economy helped improve the results generated by private equity and venture capital funds in the quarter ending September 30, 2010. Each alternative asset class earned its sixth consecutive quarter of positive returns and significantly outperformed its respective prior-quarter results, breaking a short streak of declining positive returns in each category (four consecutive quarters for private equity and two for venture capital). Private equity outperformed venture capital during the same period, while both lagged public market returns – the latter a reversal from the second quarter of 2010, when both alternative asset classes produced better returns than the major public market indices, said Cambridge Associates LLC, a provider of independent research and investment advice to institutional investors and private clients. Private equity and venture capital funds continued to outperform the public markets over the long term.
Cambridge Associates publishes a quarterly commentary on the performance of private equity and venture capital as measured by the Cambridge Associates LLC U.S. Private Equity Index® and the Cambridge Associates LLC U.S. Venture Capital Index®. The indexes represent the majority of the institutional capital raised by private equity partnerships between 1986 and 2010 and venture capital partnerships between 1981 and 2010.
Improving Exits, Deal Activity, and Leverage Aided Third-Quarter Results
Private equity funds earned a 5.1% return for the third quarter of 2010, up from 1.6% in the prior quarter. Venture capital returned 3.7% versus 0.4% for the same periods. Both fund classes benefited from a resurgence in mergers and acquisitions (M&A) and initial public offerings (IPOs).
The increases brought the total returns for the first nine months of 2010 to 11.4% for private equity and 4.8% for venture capital. Private equity outperformed the key public market indices during the nine-month period; public index returns ranged from 3.9% for the S&P 500 to 9.1% for the Russell 2000 Composite. Venture capital, on the other hand, had a mixed performance during the same period versus the public markets, besting the NASDAQ Composite and S&P 500, but returning significantly less than the Russell 2000 Composite. The private equity and venture capital indices handily outperformed their public-market counterparts over the 15- and 20-year periods ending September 30, 2010. The following table provides comparative returns for the third quarter and longer periods for private equity and venture capital vis-à-vis four key public market indices. Returns for periods of one year and longer are annualized.
With the exception of the present quarter, the private equity benchmark outperformed U.S. public markets in all of the time periods provided in the table above. The venture capital index’s results were mixed, except over the long term, where, as noted, they eclipsed public market results. The spread between the private equity and venture capital ten-year returns continued to widen in the third quarter, moving to 12.7% from 11.5% as of the second quarter.
Private Equity Fund Insights
By third-quarter’s end, capital distributions for 2010 were nearly triple all of 2009
Fund managers in the U.S. private equity index called and distributed more capital in the third quarter than they did in the second. Limited partners (LPs) contributed just over $20 billion for the quarter, a 5.2% increase, and received distributions of nearly $16.7 billion, a 28% increase over the previous quarter and the highest level of capital distributions in three years. Investors in funds launched in 2000, 2004, and 2006 collectively received roughly $9.1 billion or 54% of the capital distributed during the period.
By the end of the third quarter, fund managers had already distributed to their LPs almost three times as much capital as they did in all of 2009.
“For the third quarter, contributions again outnumbered distributions, as they have for more than three years running,” said Andrea Auerbach, Managing Director and Head of U.S. Private Equity Research at Cambridge Associates. “We also saw the exit environment continue to improve, with realizations actually increasing faster than investments. In addition, credit availability during the third quarter continued on a path towards pre-recession levels.”
IT topped energy for best-performing key sector
During the third quarter, all eight meaningfully-sized sectors in the U.S. private equity index earned positive returns. Of these, the three largest by asset value – consumer, healthcare, and energy – comprised just over half of the index’s total value. Of the eight key sectors, IT performed best, returning 9.0% for the quarter, versus a close-second energy sector, which earned 8.7%. Software had the lowest return of the key sectors, 4.4%, but also represented the smallest weight (just 5.8%) in the PE index among the top eight.
Venture Capital Fund Insights
IPO and M&A environment improve
Venture capital performance and most industry fundamentals improved in the third quarter of 2010, with valuations for venture-backed companies rising for the fifth quarter in a row. Although there was a smaller number of IPO-exits during the period, average offering prices were higher than during the previous quarter. In addition, the number of mergers and acquisitions, the number of deals with disclosed values, and the announced deal values themselves all increased as compared to the prior quarter.
The top four vintages in the index remained constant, but the percentage weight of the largest vintage dropped significantly
The largest four vintage years by size – 2000, 2006, 2005, and 2004 – remained constant and accounted for 56.5% of the U.S. venture capital index’s value. However, the percentage represented by the largest vintage, 2000, was 19.6%, down from nearly 24% one year earlier.
The venture funds raised in 1999 were the top performers of the nine vintage years that represented at least 5% of the index’s value, returning 7.5%. Increased valuations for IT and higher values plus realizations from healthcare drove 1999’s results. Of the nine largest vintages, 2001 and 2006 were the worst performers for the quarter, each returning just 1.4%.
Software takes lead from IT for the first time in four quarters
Similar to the private equity benchmark, all of the meaningfully-sized sectors in the U.S. venture capital index produced positive returns for the quarter. The index continued to be highly concentrated by sector, with the top three – healthcare, IT, and software – comprising nearly 75% of its value. Software was the best performing of the top three sectors for the quarter, generating a 7.7% return. IT, which had been the top performing sector in the entire venture capital index for the previous three quarters, still came in second among the meaningfully-sized sectors, earning 7.3% for the quarter.
“Performance of venture capital was better in the third quarter, in part because the exit environment has gradually improved over the last year. The venture capital industry has now reached a more favorable risk-return balance, and the long-term outlook for the industry is being helped by other factors, including reduced fundraising and moderated pre-money valuations and investment levels,” said Theresa Sorrentino Hajer, Managing Director and Venture Capital Research Consultant at Cambridge Associates.
Wednesday, January 26, 2011
VENTURE CAPITAL RETURNS BEGIN TO SHOW SIGNS OF IMPROVEMENT AS OF Q3 2010
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With the exception of the 10 and 15-year returns which declined slightly, venture capital performance improved across most time horizons as of the end of the third quarter of 2010, according to the Cambridge Associates U.S. Venture Capital Index®, the performance benchmark of the National Venture Capital Association. While the shifts were mild in both directions, the overall performance numbers indicated the first signs of recovery since the financial crisis of 2008. Venture capital performance also surpassed the public market indices for the 3-, 5-, 15- and 20-year time horizons.
Full report
“The third quarter of 2010 brought a change of direction to a performance trend that has been pointed downwards for several quarters,” said Mark Heesen, president of the NVCA. “An improved exit market helped boost the one year returns to positive territory while applying the brakes to the negative slide in the 3-, 5-, and 10-year horizons. Based on the current market dynamics, we would expect this positive reversal of fortune to continue into 2011 and bring the venture capital industry back into positive territory.”
Theresa Sorrentino Hajer, research consultant at Cambridge Associates said: "Conditions in the venture capital industry have improved, reaching a more favorable risk-return balance. M&A activity was up over the prior year, and post-IPO performance has been relatively strong, in line with the steadily improving public markets. One would expect that the improved exit markets, reduced fundraising and moderated pre-money valuations and investment levels will bolster the long-term viability of the VC industry."
With the exception of the 10 and 15-year returns which declined slightly, venture capital performance improved across most time horizons as of the end of the third quarter of 2010, according to the Cambridge Associates U.S. Venture Capital Index®, the performance benchmark of the National Venture Capital Association. While the shifts were mild in both directions, the overall performance numbers indicated the first signs of recovery since the financial crisis of 2008. Venture capital performance also surpassed the public market indices for the 3-, 5-, 15- and 20-year time horizons.
Full report
“The third quarter of 2010 brought a change of direction to a performance trend that has been pointed downwards for several quarters,” said Mark Heesen, president of the NVCA. “An improved exit market helped boost the one year returns to positive territory while applying the brakes to the negative slide in the 3-, 5-, and 10-year horizons. Based on the current market dynamics, we would expect this positive reversal of fortune to continue into 2011 and bring the venture capital industry back into positive territory.”
Theresa Sorrentino Hajer, research consultant at Cambridge Associates said: "Conditions in the venture capital industry have improved, reaching a more favorable risk-return balance. M&A activity was up over the prior year, and post-IPO performance has been relatively strong, in line with the steadily improving public markets. One would expect that the improved exit markets, reduced fundraising and moderated pre-money valuations and investment levels will bolster the long-term viability of the VC industry."
Monday, January 24, 2011
Venture Investors Put $26.2 Billion Into U.S. Companies in 2010, Up 11% From 2009
Business and Consumer Services Spur Investment Growth; VCs Pursue Growth Strategies for Maturing Web Companies
In 2010, growth in venture capital investment was driven by capital commitments outside of the Information Technology (IT) and Healthcare industries, which are traditionally venture capitalists' comfort zones. Throughout the year, 2,799 venture deals raised $26.2 billion, a 6% increase in deals and an 11% increase in capital invested over 2009, when 2,636 deals raised $23.6 billion, according to Dow Jones VentureSource.
In the fourth quarter of 2010, 735 deals raised $7.6 billion. This represents a 6% decrease in deals completed but a 6% increase in capital invested from the particularly strong fourth quarter of 2009, which tracked 782 deals completed and $7.2 billion invested.
"The Healthcare and IT industries accounted for more than half of venture investment in 2010 but are not currently driving the growth," said Jessica Canning, global research director, Dow Jones VentureSource. "Investment in business technologies, consumer solutions and energy companies gained the most traction in the last year."
The median deal size for 2010 was $4.4 million, down from the $5 million median in 2009.
Healthcare Investment Drops, IT Up Slightly
Venture investment in Healthcare companies fell 7% in 2010 to $7.4 billion for 702 deals. As usual, Biopharmaceuticals companies claimed the largest proportion of investment in the Healthcare industry, with 317 deals raising $3.4 billion. The industry's smallest sector, Healthcare Services, saw the strongest growth. Fifty-four Healthcare Services companies raised $1.2 billion, a 29% increase in deal activity and more than triple the capital raised in 2009.
IT companies garnered $7.2 billion for 889 deals in 2010, up from the $6.7 billion put into 858 deals in 2009. Software was the only IT sector to see an increase in both deal activity and capital invested as 608 deals raised $3.8 billion. The Communications and Networking sector was the hardest hit as it collected $1.2 billion for 90 deals, a 27% drop in deal activity and 21% drop in capital invested from the previous year.
Business and Consumer Services Spur Investment Growth
The Consumer Services industry garnered $4.4 billion for 483 deals in 2010, a 67% spike in capital invested and a 23% jump in deal activity over 2009. The industry, which is driven by investment in the Web-heavy Consumer Information Services sector, benefited from increased investor interest as well as sizable cash infusions for maturing Web companies.
"Venture capitalists are pursuing strategies more akin to growth equity investing than traditional venture capital with some of their maturing Web companies," said Scott Austin, editor of Dow Jones VentureWire. "Companies like Groupon, Zynga and Facebook are generating hundreds of millions of dollars in revenue so VCs don't need to exit quickly. Instead, they are growing these companies through acquisitions of technology and talent as well as business development, which can require sizable cash infusions."
In 2010, both investment and deal activity in the Business and Financial Services industry jumped 8% as 447 deals raised $3.3 billion. The largest proportion of investment in the industry went to the Business Support Services sector, which raised $2.5 billion for 337 deals and was largely driven by investment in advertising and marketing technologies and services.
Renewed Interest in Renewables
After the Energy and Utilities industry saw deal activity drop 16% and investment halved from 2008 to 2009, investors returned to the industry in 2010. Last year, 113 Energy and Utilities deals collected $2.5 billion, a 19% increase in deal activity and 39% increase in investment over 2009. The industry continued to be driven by the Renewable Energy sector, which collected $2 billion for 94 deals, a 35% increase in capital invested and a 25% increase in deal activity over the year earlier.
VCs Continue to Focus on Later-Stage Deals
Later-stage deals accounted for 40% of the year's deals and 61% of total capital raised in 2010, a slight change from 2009 when later-stage deals accounted for 38% of deals and 55% of capital raised. Seed- and first-rounds accounted for 36% of deals and 18% of capital invested during 2010, nearly unchanged from 2009 when early-stage rounds claimed 35% of deal activity and 19% of capital raised.
In 2010, growth in venture capital investment was driven by capital commitments outside of the Information Technology (IT) and Healthcare industries, which are traditionally venture capitalists' comfort zones. Throughout the year, 2,799 venture deals raised $26.2 billion, a 6% increase in deals and an 11% increase in capital invested over 2009, when 2,636 deals raised $23.6 billion, according to Dow Jones VentureSource.
In the fourth quarter of 2010, 735 deals raised $7.6 billion. This represents a 6% decrease in deals completed but a 6% increase in capital invested from the particularly strong fourth quarter of 2009, which tracked 782 deals completed and $7.2 billion invested.
"The Healthcare and IT industries accounted for more than half of venture investment in 2010 but are not currently driving the growth," said Jessica Canning, global research director, Dow Jones VentureSource. "Investment in business technologies, consumer solutions and energy companies gained the most traction in the last year."
The median deal size for 2010 was $4.4 million, down from the $5 million median in 2009.
Healthcare Investment Drops, IT Up Slightly
Venture investment in Healthcare companies fell 7% in 2010 to $7.4 billion for 702 deals. As usual, Biopharmaceuticals companies claimed the largest proportion of investment in the Healthcare industry, with 317 deals raising $3.4 billion. The industry's smallest sector, Healthcare Services, saw the strongest growth. Fifty-four Healthcare Services companies raised $1.2 billion, a 29% increase in deal activity and more than triple the capital raised in 2009.
IT companies garnered $7.2 billion for 889 deals in 2010, up from the $6.7 billion put into 858 deals in 2009. Software was the only IT sector to see an increase in both deal activity and capital invested as 608 deals raised $3.8 billion. The Communications and Networking sector was the hardest hit as it collected $1.2 billion for 90 deals, a 27% drop in deal activity and 21% drop in capital invested from the previous year.
Business and Consumer Services Spur Investment Growth
The Consumer Services industry garnered $4.4 billion for 483 deals in 2010, a 67% spike in capital invested and a 23% jump in deal activity over 2009. The industry, which is driven by investment in the Web-heavy Consumer Information Services sector, benefited from increased investor interest as well as sizable cash infusions for maturing Web companies.
"Venture capitalists are pursuing strategies more akin to growth equity investing than traditional venture capital with some of their maturing Web companies," said Scott Austin, editor of Dow Jones VentureWire. "Companies like Groupon, Zynga and Facebook are generating hundreds of millions of dollars in revenue so VCs don't need to exit quickly. Instead, they are growing these companies through acquisitions of technology and talent as well as business development, which can require sizable cash infusions."
In 2010, both investment and deal activity in the Business and Financial Services industry jumped 8% as 447 deals raised $3.3 billion. The largest proportion of investment in the industry went to the Business Support Services sector, which raised $2.5 billion for 337 deals and was largely driven by investment in advertising and marketing technologies and services.
Renewed Interest in Renewables
After the Energy and Utilities industry saw deal activity drop 16% and investment halved from 2008 to 2009, investors returned to the industry in 2010. Last year, 113 Energy and Utilities deals collected $2.5 billion, a 19% increase in deal activity and 39% increase in investment over 2009. The industry continued to be driven by the Renewable Energy sector, which collected $2 billion for 94 deals, a 35% increase in capital invested and a 25% increase in deal activity over the year earlier.
VCs Continue to Focus on Later-Stage Deals
Later-stage deals accounted for 40% of the year's deals and 61% of total capital raised in 2010, a slight change from 2009 when later-stage deals accounted for 38% of deals and 55% of capital raised. Seed- and first-rounds accounted for 36% of deals and 18% of capital invested during 2010, nearly unchanged from 2009 when early-stage rounds claimed 35% of deal activity and 19% of capital raised.
Cleantech Sectors of Solar, Wind and Smart Grid All Up in Venture Capital (VC) Investments in 2010
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Smart Grid Has its Best Year; Solar Slightly Up from 2009
Mercom Capital Group, llc, a global clean energy market intelligence, consulting and communications firm, today released 2010 merger and acquisition (M&A) and funding activity for the cleantech sectors of solar, smart grid and wind.
To download a copy of funding reports for all sectors, visit: http://www.mercomcapital.com/cleanenergyreports.php.
Download charts and graphs: Solar 2010, Smart Grid 2010, Wind 2010.
“Considering 2009 was a recession year, solar was only slightly up in 2010. After a good second quarter, VC investments trended down in Q3 and Q4,” commented Raj Prabhu, Managing Partner at Mercom Capital Group. 2010 VC activity came in at $1.67 billion in 65 transactions, up 18 percent over 2009 ($1.4 billion). There was increased activity in large-scale solar project funding as well as debt and other funding types, pointing to an ease in the availability of credit after a challenging 2009. A total of 148 different investors participated in VC funding rounds in 2010. Credit facilities provided to Chinese companies by Chinese banks came in at an eye popping $34 billion, dwarfing all other transactions in solar in 2010.
Solar M&A transactions in 2010 totaled $2 billion in 44 deals. Solar project M&A activity amounted to another $450 million in 18 deals out of which only four were disclosed.
Large-scale project funding came in at $4.1 billion in 2010, while debt and other funding types logged in $36 billion of which $34 billion were in the form of credit facilities provided by Chinese Government Banks to Chinese companies, which included LDK Solar, Yingli Solar, JA Solar, Suntech and Trina Solar.
“It was a banner year for Smart Grid in terms of VC funding and M&A activity, with VC funding almost doubling compared to 2009. 87 different investors participated in VC rounds in 2010,” further commented Raj Prabhu. VC funding in the Smart Grid sector was at its highest compared to the previous two years with $769 million in 51 deals, an 88 percent increase over 2009 ($410 million). M&A activity was also robust for the Smart Grid sector in 2010 with 40 transactions. Only four were disclosed for a total of $1.3 billion, of which $1 billion was the acquisition of Ventyx by ABB.
The Wind sector also saw a 40 percent increase in VC and PE activity in 2010 with $277 million invested compared to $198 million in 2009. Large offshore wind projects boosted project funding activity to over $9 billion in 2010. M&A transactions in the Wind sector came to $1.3 billion in 23 deals, with the $860 million acquisition of John Deere Renewables by Exelon making up the bulk of it.
Download a copy of the complete annual report for all sectors.
Download charts and graphs: Solar 2010, Smart Grid 2010, Wind 2010.
Solar
Notable VC transactions for the Solar sector in 2010 included BrightSource Energy VC raise of $176 million, followed closely by Solyndra’s raise of $175 million and Amonix, which secured a series B raise of $129.4 million. Project funding transactions worth noting included, Torresol Energy (Valle 1 and Valle 2 CSP plants) for $760 million, Abengoa Solar and JGC Corporation (CSP Plant) for $451 million, SunPower (California Valley Solar Ranch Project) for $450 million and Abengoa Solar and ITOCHU Corporation (CSP Plant) for $448 million. 2010 top five investors in solar included Good Energies, New Enterprise Associates, Applied Ventures, Draper Fisher Jurvetson and Polaris Venture Partners. Project funding investments for 2010 were led by Mizuho Corporate Bank, Natixis, Unicredit Group, BNP Paribas and Centrobanca.
Among the top M&A transactions for Solar this year, the acquisition of Etimex Solar by Solutia for $326 million followed by Recurrent Energy by Sharp Corp for $305 million lead the list closely followed by NextLight Renewable Power by First Solar for $285 million and SunRay by SunPower for $277 million.
Solar Q4
Total VC funding for the Solar sector in Q4 came in at $238 million for 16 transactions out of which 14 were disclosed compared to $169 million for 11 disclosed transactions in Q3. Project funding came in at $2.32B in 14 disclosed deals out of a total of 15 deals. Noteworthy project funding transactions included $450 million for SunPower followed closely by $448 million for Abengoa Solar and ITOCHU Corporation. Significant VC investments included $110 million for Abound Solar, $26 million for 1366 Technologies and $25 million for SolarEdge Technologies.
At $669 million, there was a surge in M&A activity during Q4 compared to $586 million in Q3. Out of 27 M&A transactions in Q4, eight were disclosed, which was the same in Q3. Significant M&A transactions in the Solar sector included the acquisition of Glory Silicon Technology Investments (Hong Kong Limited) by Suntech Power Holdings for $127 million and the acquisition of Sino Light Investments by Solargiga Energy Holdings for $108 million.
Smart Grid
Top Smart Grid VC transactions included the $165 million raise by Landis+Gyr, the $106 million raise by Trilliant and the $52 million raise by OpenPeak. The acquisition of Ventyx by ABB for more than $1 billion remained the largest M&A transaction for the year. Other significant Smart Grid transactions included Maxim Integrated Products’ acquisition of Teridian Semiconductor for $315 million and NXP Semiconductors’ acquisition of Jennic for $20 million. Top five investors in Smart Grid in 2010 included GE Energy Financial Services, Emerald Technology Ventures, Kleiner Perkins Caufield & Byers, Foundation Capital and RockPort Capital Partners.
Smart Grid Q4
Funding activity in the Smart Grid sector during Q4 remained flat compared to Q3. Total disclosed investments in Smart Grid was $188 million for 18 transactions out of which 17 were disclosed compared to $187.25 million for nine transactions out of which seven were disclosed in Q3. Significant VC funding transactions in the sector included a $50 million raise by OPower, a $24 million Series B raise by AlertMe and a $24 million Series C raise by Ice Energy. Debt and other funding for the quarter totaled $15 million for one transaction. Out of 15 Smart Grid M&A transactions, none were disclosed.
Wind
VC transactions for 2010 increased to $277 million for 11 transactions out of which 10 were disclosed compared to $198 million for 20 transactions in 2009. Significant VC transactions in 2010 included eGen’s raise of $79 million followed by Champlin Windpower and Nordic Windpower’s raise of $50 million and $38 million (Series C) respectively. Top VC investors for the sector included Kleiner Perkins Caufield & Byers, Khosla Ventures and MissionPoint Capital Partners.
Among significant large-scale project funding transactions, C-Power raised $1.7 billion, followed by Terra-Gen Power which raised $1.2 billion. Rabobank, European Investment Bank, and Manulife Financial Corporation (Manulife) were some of the investors who topped the list for Wind project funding this year. Other debt transactions included China Windpower, which raised a $732 million credit line and Pattern Energy Group, which raised $400 million in equity financing.
M&A transactions for the wind sector including projects in 2010 came in at $2.37 billion in 49 deals. The acquisition of John Deere Renewables by Exelon Corporation for $860 million, Seajacks International by Riverstone Holdings for $207 million, and Clipper Windpower by United Technologies Corp for $112 million is the major M&A activities for the year.
Wind Q4
In the fourth quarter, the Wind sector VC investments came in at $59 million for three deals compared to the third quarter which came in at $102 million for the same number of deals. Project and other funding investments increased to $4.9B for 24 transactions out of which 23 were disclosed. Notable VC transactions included a $50 million raise by Champlin Windpower, a $5.8 million raise by Greengate Power Corporation, and a $3.14 million raise by NGenTec. Significant project funding transactions included C-Power for $1.7B, Trianel for $919 million and Brookfield Renewable Power for $350 million.
Out of nine M&A transactions in Q4, three were disclosed for a total of $707 million compared to Q3 which had a total of nine deals out of which three were disclosed for $922 million. Significant transactions in the sector included the acquisition of Clipper Windpower by United Technologies for $112 million, followed by Mengdong Xiehe New Energy by Jilin Power Share for $27.5 million. The most notable project acquisition was Brookfield Renewable Power’s Comber Wind Project acquisition by Brookfield Renewable Power Fund for $567 million.
According to the Department of Energy, $2.5 billion was spent in the fourth quarter of 2010 compared to $3.04 billion in Q3. DOE has spent a total of $10.39 billion to date out of the $32 billion funding commitments from the Recovery Act.
To download all funding transactions for Q4.
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Smart Grid Has its Best Year; Solar Slightly Up from 2009
Mercom Capital Group, llc, a global clean energy market intelligence, consulting and communications firm, today released 2010 merger and acquisition (M&A) and funding activity for the cleantech sectors of solar, smart grid and wind.
To download a copy of funding reports for all sectors, visit: http://www.mercomcapital.com/cleanenergyreports.php.
Download charts and graphs: Solar 2010, Smart Grid 2010, Wind 2010.
“Considering 2009 was a recession year, solar was only slightly up in 2010. After a good second quarter, VC investments trended down in Q3 and Q4,” commented Raj Prabhu, Managing Partner at Mercom Capital Group. 2010 VC activity came in at $1.67 billion in 65 transactions, up 18 percent over 2009 ($1.4 billion). There was increased activity in large-scale solar project funding as well as debt and other funding types, pointing to an ease in the availability of credit after a challenging 2009. A total of 148 different investors participated in VC funding rounds in 2010. Credit facilities provided to Chinese companies by Chinese banks came in at an eye popping $34 billion, dwarfing all other transactions in solar in 2010.
Solar M&A transactions in 2010 totaled $2 billion in 44 deals. Solar project M&A activity amounted to another $450 million in 18 deals out of which only four were disclosed.
Large-scale project funding came in at $4.1 billion in 2010, while debt and other funding types logged in $36 billion of which $34 billion were in the form of credit facilities provided by Chinese Government Banks to Chinese companies, which included LDK Solar, Yingli Solar, JA Solar, Suntech and Trina Solar.
“It was a banner year for Smart Grid in terms of VC funding and M&A activity, with VC funding almost doubling compared to 2009. 87 different investors participated in VC rounds in 2010,” further commented Raj Prabhu. VC funding in the Smart Grid sector was at its highest compared to the previous two years with $769 million in 51 deals, an 88 percent increase over 2009 ($410 million). M&A activity was also robust for the Smart Grid sector in 2010 with 40 transactions. Only four were disclosed for a total of $1.3 billion, of which $1 billion was the acquisition of Ventyx by ABB.
The Wind sector also saw a 40 percent increase in VC and PE activity in 2010 with $277 million invested compared to $198 million in 2009. Large offshore wind projects boosted project funding activity to over $9 billion in 2010. M&A transactions in the Wind sector came to $1.3 billion in 23 deals, with the $860 million acquisition of John Deere Renewables by Exelon making up the bulk of it.
Download a copy of the complete annual report for all sectors.
Download charts and graphs: Solar 2010, Smart Grid 2010, Wind 2010.
Solar
Notable VC transactions for the Solar sector in 2010 included BrightSource Energy VC raise of $176 million, followed closely by Solyndra’s raise of $175 million and Amonix, which secured a series B raise of $129.4 million. Project funding transactions worth noting included, Torresol Energy (Valle 1 and Valle 2 CSP plants) for $760 million, Abengoa Solar and JGC Corporation (CSP Plant) for $451 million, SunPower (California Valley Solar Ranch Project) for $450 million and Abengoa Solar and ITOCHU Corporation (CSP Plant) for $448 million. 2010 top five investors in solar included Good Energies, New Enterprise Associates, Applied Ventures, Draper Fisher Jurvetson and Polaris Venture Partners. Project funding investments for 2010 were led by Mizuho Corporate Bank, Natixis, Unicredit Group, BNP Paribas and Centrobanca.
Among the top M&A transactions for Solar this year, the acquisition of Etimex Solar by Solutia for $326 million followed by Recurrent Energy by Sharp Corp for $305 million lead the list closely followed by NextLight Renewable Power by First Solar for $285 million and SunRay by SunPower for $277 million.
Solar Q4
Total VC funding for the Solar sector in Q4 came in at $238 million for 16 transactions out of which 14 were disclosed compared to $169 million for 11 disclosed transactions in Q3. Project funding came in at $2.32B in 14 disclosed deals out of a total of 15 deals. Noteworthy project funding transactions included $450 million for SunPower followed closely by $448 million for Abengoa Solar and ITOCHU Corporation. Significant VC investments included $110 million for Abound Solar, $26 million for 1366 Technologies and $25 million for SolarEdge Technologies.
At $669 million, there was a surge in M&A activity during Q4 compared to $586 million in Q3. Out of 27 M&A transactions in Q4, eight were disclosed, which was the same in Q3. Significant M&A transactions in the Solar sector included the acquisition of Glory Silicon Technology Investments (Hong Kong Limited) by Suntech Power Holdings for $127 million and the acquisition of Sino Light Investments by Solargiga Energy Holdings for $108 million.
Smart Grid
Top Smart Grid VC transactions included the $165 million raise by Landis+Gyr, the $106 million raise by Trilliant and the $52 million raise by OpenPeak. The acquisition of Ventyx by ABB for more than $1 billion remained the largest M&A transaction for the year. Other significant Smart Grid transactions included Maxim Integrated Products’ acquisition of Teridian Semiconductor for $315 million and NXP Semiconductors’ acquisition of Jennic for $20 million. Top five investors in Smart Grid in 2010 included GE Energy Financial Services, Emerald Technology Ventures, Kleiner Perkins Caufield & Byers, Foundation Capital and RockPort Capital Partners.
Smart Grid Q4
Funding activity in the Smart Grid sector during Q4 remained flat compared to Q3. Total disclosed investments in Smart Grid was $188 million for 18 transactions out of which 17 were disclosed compared to $187.25 million for nine transactions out of which seven were disclosed in Q3. Significant VC funding transactions in the sector included a $50 million raise by OPower, a $24 million Series B raise by AlertMe and a $24 million Series C raise by Ice Energy. Debt and other funding for the quarter totaled $15 million for one transaction. Out of 15 Smart Grid M&A transactions, none were disclosed.
Wind
VC transactions for 2010 increased to $277 million for 11 transactions out of which 10 were disclosed compared to $198 million for 20 transactions in 2009. Significant VC transactions in 2010 included eGen’s raise of $79 million followed by Champlin Windpower and Nordic Windpower’s raise of $50 million and $38 million (Series C) respectively. Top VC investors for the sector included Kleiner Perkins Caufield & Byers, Khosla Ventures and MissionPoint Capital Partners.
Among significant large-scale project funding transactions, C-Power raised $1.7 billion, followed by Terra-Gen Power which raised $1.2 billion. Rabobank, European Investment Bank, and Manulife Financial Corporation (Manulife) were some of the investors who topped the list for Wind project funding this year. Other debt transactions included China Windpower, which raised a $732 million credit line and Pattern Energy Group, which raised $400 million in equity financing.
M&A transactions for the wind sector including projects in 2010 came in at $2.37 billion in 49 deals. The acquisition of John Deere Renewables by Exelon Corporation for $860 million, Seajacks International by Riverstone Holdings for $207 million, and Clipper Windpower by United Technologies Corp for $112 million is the major M&A activities for the year.
Wind Q4
In the fourth quarter, the Wind sector VC investments came in at $59 million for three deals compared to the third quarter which came in at $102 million for the same number of deals. Project and other funding investments increased to $4.9B for 24 transactions out of which 23 were disclosed. Notable VC transactions included a $50 million raise by Champlin Windpower, a $5.8 million raise by Greengate Power Corporation, and a $3.14 million raise by NGenTec. Significant project funding transactions included C-Power for $1.7B, Trianel for $919 million and Brookfield Renewable Power for $350 million.
Out of nine M&A transactions in Q4, three were disclosed for a total of $707 million compared to Q3 which had a total of nine deals out of which three were disclosed for $922 million. Significant transactions in the sector included the acquisition of Clipper Windpower by United Technologies for $112 million, followed by Mengdong Xiehe New Energy by Jilin Power Share for $27.5 million. The most notable project acquisition was Brookfield Renewable Power’s Comber Wind Project acquisition by Brookfield Renewable Power Fund for $567 million.
According to the Department of Energy, $2.5 billion was spent in the fourth quarter of 2010 compared to $3.04 billion in Q3. DOE has spent a total of $10.39 billion to date out of the $32 billion funding commitments from the Recovery Act.
To download all funding transactions for Q4.
Ω
2010 funding and merger and acquisition (M&A) activity for the healthcare IT sector.
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Mercom Capital Group, llc, a global market intelligence, consulting and communications firm, today released 2010 funding and merger and acquisition (M&A) activity for the healthcare IT sector.
The Healthcare IT sector had $211 million in venture capital (VC) funding in 2010 in 22 deals. Sixty-two different investors participated in these funding rounds. $629 million was raised by Healthcare IT companies outside of VC funding, through various forms of debt and credit facilities, which is a positive sign for the sector. Significant VC transactions included a $60 million Series C raise by Castlight Health, a $30 million raise by PatientSafe Solutions and a $20 million Series D raise by Phreesia. The top five investors in the sector for 2010 included VantagePoint Venture Partners, Long River Ventures, Morgenthaler Ventures, OpenView Venture Partners and Osage Partners.
M&A activity was robust in the Healthcare IT sector totaling almost $4 billion in 85 different deals. Only 21 deals were disclosed, indicating a much larger M&A activity number. Notable transactions included the $1.3 billion merger of Allscripts and Eclipsys, the acquisition of Phase Forward by Oracle for $685 million and the acquisition of Medicity by Aetna for $500 million. “Consolidation and strategic acquisitions among Healthcare IT companies helped fuel this surge in M&A activity,” commented Raj Prabhu, Managing Partner at Mercom Capital Group.
Healthcare IT – Fourth Quarter
VC funding activity decreased in Q4 coming in at $11 million in five transactions out of which three were disclosed, compared to $62 million for seven transactions during Q3. Notable VC transactions included a Series A raise of $7.5 million by DICOM Grid and a $2.6 million raise by Halfpenny Technologies. Debt and other funding activity amounted to $567 million in two disclosed transactions, Agfa’s $130 million loan by the European Investment Bank and the $394 million loan provided to CompuGroup Medical underwritten by SEB.
M&A activity for the sector saw a surge in the number of deals compared to Q3. Out of 30 M&A transactions, seven were disclosed for a total of $860 million compared to the third quarter that had a total of 19 deals of which three were disclosed for $326 million. The $500 million acquisition of Medicity by Aetna and the $250 million acquisition of PHNS by The ConJoin Group were the notable transactions that took place in Q4.
Mr. Prabhu continued, “Healthcare IT funding steadily dropped in Q4, while the number of M&A transactions almost doubled, indicating that we might be seeing some consolidation in the industry.”
Download healthcare IT funding reports.
Download charts and graphs.
Mercom Capital Group, llc, a global market intelligence, consulting and communications firm, today released 2010 funding and merger and acquisition (M&A) activity for the healthcare IT sector.
The Healthcare IT sector had $211 million in venture capital (VC) funding in 2010 in 22 deals. Sixty-two different investors participated in these funding rounds. $629 million was raised by Healthcare IT companies outside of VC funding, through various forms of debt and credit facilities, which is a positive sign for the sector. Significant VC transactions included a $60 million Series C raise by Castlight Health, a $30 million raise by PatientSafe Solutions and a $20 million Series D raise by Phreesia. The top five investors in the sector for 2010 included VantagePoint Venture Partners, Long River Ventures, Morgenthaler Ventures, OpenView Venture Partners and Osage Partners.
M&A activity was robust in the Healthcare IT sector totaling almost $4 billion in 85 different deals. Only 21 deals were disclosed, indicating a much larger M&A activity number. Notable transactions included the $1.3 billion merger of Allscripts and Eclipsys, the acquisition of Phase Forward by Oracle for $685 million and the acquisition of Medicity by Aetna for $500 million. “Consolidation and strategic acquisitions among Healthcare IT companies helped fuel this surge in M&A activity,” commented Raj Prabhu, Managing Partner at Mercom Capital Group.
Healthcare IT – Fourth Quarter
VC funding activity decreased in Q4 coming in at $11 million in five transactions out of which three were disclosed, compared to $62 million for seven transactions during Q3. Notable VC transactions included a Series A raise of $7.5 million by DICOM Grid and a $2.6 million raise by Halfpenny Technologies. Debt and other funding activity amounted to $567 million in two disclosed transactions, Agfa’s $130 million loan by the European Investment Bank and the $394 million loan provided to CompuGroup Medical underwritten by SEB.
M&A activity for the sector saw a surge in the number of deals compared to Q3. Out of 30 M&A transactions, seven were disclosed for a total of $860 million compared to the third quarter that had a total of 19 deals of which three were disclosed for $326 million. The $500 million acquisition of Medicity by Aetna and the $250 million acquisition of PHNS by The ConJoin Group were the notable transactions that took place in Q4.
Mr. Prabhu continued, “Healthcare IT funding steadily dropped in Q4, while the number of M&A transactions almost doubled, indicating that we might be seeing some consolidation in the industry.”
Download healthcare IT funding reports.
Download charts and graphs.
Friday, January 21, 2011
ANNUAL VENTURE INVESTMENT INCREASES FOR FIRST TIME SINCE 2007, ACCORDING TO THE MONEYTREE REPORT
Nearly All Industry Sectors Show Double-Digit Gains in 2010
Venture capitalists invested $21.8 billion in 3,277 deals in 2010, an increase of 19 percent in dollars and a 12 percent rise in deals over the prior year, according to the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA), based on data from Thomson Reuters. The rise in venture investments in 2010 represents the first time the annual investment level has increased since 2007. Investments in the fourth quarter of 2010 totaled $5.0 billion in 765 deals, a 2 percent increase in dollars but a 3 percent decrease in deals from the third quarter of 2010 when $4.9 billion went into 789 deals.
Double-digit increases in investments in 2010 were spread across almost every industry, including the Clean Technology and Internet-Specific sectors. Investment dollars also increased across every stage of development category, with the exception of a 2 percent decrease in Seed Stage investments. First-time financings rose in 2010 compared to the prior year, however, fourth quarter investing did show a decline in both first-time dollars and deals when compared to Q3 2010.
National data including breakouts by industry, stage and first rounds
Regional and state data
Top 10 deal list for Q4 2010
Top 10 deal list for Full Year 2010
Sector and Industry Analysis
The Software industry recaptured its status as the single largest investment sector for the year, rising 20 percent over 2009 to $4.0 billion in 2010, which was invested into 835 deals, a 21 percent rise over the prior year. Software investing also increased in the fourth quarter of 2010 to the highest quarterly dollar level since Q3 2007 with $1.1 billion going into 218 deals. Software was also the number one sector for dollars invested and total number of deals in Q4 and was the only industry sector to receive more than $1 billion in the fourth quarter.
Biotechnology investing increased modestly in 2010 by 3 percent in dollars and 8 percent in deals, with $3.7 billion going into 460 deals, dropping it to the second largest investment sector for the year in terms of dollars and deals. For the fourth quarter, Biotechnology investing declined 24 percent in dollars and fell 15 percent in the number of deals from the third quarter with $685 million going into 94 rounds.
The Medical Device industry fell 9 percent in dollars and was flat in terms of deals in 2010, finishing the year as the fourth largest sector with $2.3 billion going into 324 deals. For the fourth quarter, Medical Devices saw a drop of 31 percent in dollars and 15 percent in deals from Q3 2010 with $400 million going into 71 deals. The Life Sciences sector (Biotech and Medical Devices combined) accounted for 28 percent of all venture capital dollars invested in 2010 compared to 33 percent in 2009.
The Clean Technology sector experienced a significant increase in 2010 with $3.7 billion invested in 267 deals. This investment level represents a 76 percent increase in dollars and a 37 percent increase in deal volume from 2009 when $2.1 billion went into 195 deals. These investment levels remained below 2008 levels of $4.0 billion into 277 deals, which was an all-time high. Clean Technology investing accounted for 17 percent of all venture capital dollars in 2010 compared to 11 percent in 2009. In the fourth quarter, venture capitalists invested $765 million into 57 Clean Tech deals. For the full year 2010, five of the top ten deals were in the Clean Tech category; four of the top 10 deals in Q4 fell into the Clean Tech category as well. Clean Technology crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation.
Internet-specific companies also saw an increase in investing in 2010. The $3.78 billion going into 729 deals represented a 28 percent increase in dollars and 14 percent in deals from 2009 when $2.9 billion went into 638 deals. For the fourth quarter, Internet-specific investment increased 65 percent in dollars and 19 percent in deals with $1.2 billion going into 190 deals compared to $745 million going into 160 deals in the third quarter of 2010. ‘Internet-specific’ is a discrete classification assigned to a company whose business model is fundamentally dependent on the Internet, regardless of the company’s primary industry category. These companies accounted for 17 percent of all venture capital dollars in 2010, up from 16 percent in 2009.
With the exception of the Life Sciences and the Networking and Equipment industries, every industry category had double digit increases for the year. Industry sectors experiencing some of the biggest dollar increases in 2010 included: IT Services (44 percent); Telecommunications (77 percent); and Media & Entertainment (18 percent).
Stage of Development
Investments into Seed Stage companies decreased 2 percent in terms of dollars but increased 4 percent in terms of deals with $1.7 billion going into 363 companies in 2010. For the fourth quarter, venture capitalists invested $243 million into 80 seed stage companies, a 14 percent decrease in dollars and a 7 percent decline in deals compared to the third quarter of the year. Seed Stage companies attracted 8 percent of dollars and 11 percent of deals in 2010 compared to 10 percent of dollars and 12 percent of deals in 2009.
Early Stage investments experienced double-digit increases, rising 15 percent in terms of dollars and 25 percent in terms of deals in 2010 to $5.3 billion in 1,147 deals. For the fourth quarter, Early Stage deals increased, with $1.4 billion going into 285 deals, a 7 percent increase in dollars and 4 percent increase in deals from Q3. Early Stage companies attracted 24 percent of dollars and 35 percent of deals in 2010 compared to 25 percent of dollars and 31 percent of deals in 2009.
Expansion Stage investments increased in 2010 by 47 percent in dollars and 21 percent in deals with $8.5 billion going into 1,021 deals. Expansion funding rose in the fourth quarter, increasing 32 percent from the prior quarter to $2.2 billion. The number of deals also increased during the quarter, improving 7 percent to 245. Expansion Stage companies attracted 39 percent of dollars and 31 percent of deals in 2010 compared to 32 percent of dollars and 29 percent of deals in 2009.
In 2010, $6.3 billion was invested into 746 Later Stage deals, a 3 percent increase in dollars and a 9 percent decrease in deals for the year. For the fourth quarter, $1.2 billion went into 155 deals, which represents a 29 percent decrease in terms of dollars and a 22 percent decline in terms of deals from the third quarter of 2010. Later Stage companies attracted 29 percent of dollars and 23 percent of deals in 2010 compared to 34 percent of dollars and 28 percent of deals in 2009.
First-Time Financings
First-time financings jumped 29 percent both in terms of dollars and deals from the prior year, rising to $4.3 billion going into 999 companies. However, the dollar level and number of companies receiving venture capital for the first time decreased in the fourth quarter by 32 and 8 percent, respectively, over the third quarter, dropping to $836 million into 235 companies. The fourth quarter of 2010 was the first time since the third quarter of 2007 in which first-time financings did not exceed one billion dollars.
Industries receiving the most dollars in first-time financings in 2010 were Software, Biotechnology, and Industrial/Energy. Industries with the most first-time deals in 2010 were Software, Biotechnology, and Media/Entertainment.
Fifty-one percent of first-time deals in 2010 were in the Early Stage of development followed by the Seed Stage of development at 24 percent, Expansion Stage companies at 17 percent and Later Stage companies at 8 percent.
MoneyTree Report results are available online at www.pwcmoneytree.com.
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