Dow Jones VentureSource 2Q’14 Europe Venture Capital Rep

VentureSource

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

Highlights for 2Q 2014 include:

- European venture capital fundraising rallied from customary first quarter decline to match 2Q 2013;
- Venture capital investment into European companies improved to reach highest quarterly investment figure since 3Q 2001;
- Despite a slide in mergers and acquisitions (M&As), overall exit activity improved from the previous quarter due to the highest number of initial public offerings (IPOs) in a quarter since 4Q 2006.

FUNDRAISING

European Venture Capital Fundraising Rallies in 2Q 2014

20 European venture capital funds accumulated €1.03 billion during 2Q 2014, equating to an increase of 58% in euros raised from 1Q 2014 despite the number of fund closings remaining flat. Though level with 2Q 2013, the raised figure falls short of the €1.18 billion raised during 2Q 2012.
A total of €1.68 billion were raised by 40 European venture capital funds during the first half of 2014, representing a dip of 5% in euros raised despite fund closings increasing by 29% from the first half of 2013.
The largest fund of the quarter was Index Ventures’ VII LP fund which raised €400 million, and accounted for 39% of the total amount raised for 2Q 2014.

FINANCING

Investment into European Venture-backed Companies Improves in 2Q 2014

European companies raised €2.1 billion for 365 deals during 2Q 2014, an increase of 2% in the number of deals and 41% in capital raised from the previous quarter. 2Q 2014 enjoyed the highest quarterly investment figure since 3Q 2001 when €2.7 billion were raised.
In contrast with 2Q 2013 figures, despite deal flow decreasing by 10%, investment improved by 42%.
For the first half of 2014, European venture-backed companies drew in €3.6 billion in 723 deals, a decline of 5% in deals completed but a rise of 35% in euros invested from the first six months of 2013 .

Equity Financings into Europe-based, VC-backed Companies, by Industry Group (2Q 2014)

The Consumer Services sector received the largest allocation of investment during 2Q 2014 (37%), accumulating €788 million through 109 deals. While deal flow picked up by just 2% from 1Q 2014, sector investment rose by 76%. The five largest deals completed for the quarter were all for companies in Consumer Services.
Business and Financial Services placed second in terms of equity financing, taking a 26% share of all 2Q 2014 investment. The sector raised €540 million across 108 deals, an increase of 33% in capital raised despite a 5% dip in deal flow. The sector’s investment total was the largest for a single quarter since 1Q 2001.
Healthcare remained third, with companies gathering 18% of the total amount invested during the quarter. The sector received €375 million across 52 deals, an uptick of 6% in both deal flow and capital invested from 1Q 2014.

Equity Financings into Europe-based, VC-backed Companies, by Country (2Q 2014)

The U.K. remained the favoured destination for equity financing in 2Q 2014 with a 28% share of investment into European VC-backed companies. The country received €598 million across 97 deals, an increase of 7% in deal flow and 58% in amount invested from 1Q 2014.
France placed second with a 19% share of investment. While deal flow saw an increase of 42% from 1Q 2014 with 74 completed, investment more than doubled from the €184 million drawn in during the previous quarter to reach €395 million.
Germany occupy third spot, raising €322 million, representing a 15% share of investment. The Netherlands rose to fourth spot with an 8% share, raising €166 million during 2Q 2014. It was the country’s highest quarterly investment total since 3Q 2000.

LIQUIDITY

Venture Exits in Europe See Overall Increase in 2Q 2014 Despite M&A Slide

38 venture-backed M&As took place in Europe during 2Q 2014, a decline of 19% from 1Q 2014 but an uptick of 6% from 2Q 2013.
The largest M&A of 2Q 2014 was Crossknowledge Group Ltd., a corporate e-learning service provider, which was acquired by John Wiley & Sons for €127 million.
19 venture-backed IPOs took place during 2Q 2014, 11 more than in 1Q 2014 and the most since 4Q 2006. Companies raised €407 million for their listings during 2Q 2014, a slight decline from the €449 million seen in 1Q 2014. 

DJ VentureSource China -- 2Q 2014

China -- 2Q 2014

The following report presents Dow Jones VentureSource’s quarterly findings for Chinese venture capital fundraising, investment, and liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market
.
Highlights for 2Q 2014 include:

- Chinese venture capital fundraising reached its highest level since 4Q 2011 with the highest number of fund closings since 4Q 2012;
- Quarterly venture investment continued to rise, with deal flow and dollars invested surpassing both 1Q 2014 and 2Q 2013 levels;
- While venture-backed mergers and acquisitions (M&As) picked up, initial public offerings (IPOs) fell substantially from the flurry of listings completed during 1Q 2014.

FUNDRAISING

Chinese Venture Capital Fundraising Experiences Significant Gains in 2Q 2014

Chinese venture fundraising rose to $3.06 billion across 13 funds during 2Q 2014. The quarter represents the highest fundraising accumulation since 4Q 2011 and the most number of funds since 4Q 2012.

Venture fundraising for the first half of 2014 compared very favourably to 2013’s equivalent period with $4.27 billion raised across 19 venture capital funds. This equates to a 58% rise in the number of fund closings and over three times the amount accumulated during the first half of last year.

IDG Capital Partners’ China Venture Capital IV fund was the largest of 2Q 2014, raising $586 million and accounting for 19% of the total amount for the quarter.

FINANCING

Venture Capital Investment in China Continues Rise in 2Q 2014

Investment into Chinese venture-backed companies continued to improve in 2Q 2014, as companies raised $2.8 billion from 121 deals, equating to a 13% increase in the number of deals and a 19% improvement in capital invested from the previous quarter.

Compared with 2Q 2013, deal flow improved by 38% while investment doubled.
Investment for the first half of 2014 dwarfs that of the equivalent 2013 period, with $5.1 billion raised compared with a little over $2 billion. Similarly, deal flow has also risen, from 151 to 228, equating to a 51% increase 

Report disputes Yellen's biotech concerns

Despite the stir caused by recent comments by Federal Reserve Chair Janet Yellenregarding the state of the biotechnology sector, Kalorama Information sees potential for growth based on the substantial investments in venture capital that came into the biotech market in 2012-2013. Kalorama's Biotech Funding Deals and Partnerships notes that biotech investment has increased significantly in the past few years and that 2013 saw a noticeable spike. In the last few years, this has resulted in a complex series of deals and transactions involving major players in the industry, as investors invest in proven companies on new science and technology initiatives that have potential in the clinic. 

Fed Chair Janet Yellen commented regarding the biotechnology sector in testimony to Congress on July 15th(http://www.federalreserve.gov/monetarypolicy/files/20140715_mprfullreport.pdf), stating that "valuation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year."  This comment has been much discussed in the media, and some media outlets and business pundits have questioned whether the comments have affected biotechnology stocks. 

The healthcare market research firm notes that the statement did not take into account information from venture capital markets, which have for the most part backed biotechnology. 

"While Federal Reserve Chair Yellen's comments were directed at equity markets, venture capital spends are another way to judge a sector's merit," said Bruce Carlson, Publisher of Kalorama Information.  "One out of every eight dollars invested in companies is invested in biotech.  For key players in the biotechnology sector, the landscape for investing remains fertile."

Kalorama's Biotech Funding Deals and Partnerships notes significant transactions from 2011 to 2014 involving major companies such as Alkermes, Boston Biomedical, Dicerna Pharmaceuticals, immatics biotechnologies, Micromet, Reata Pharmaceuticals, UCB and Xoma. This report reviews the nature and direction of funding trends, and outlines the important role that investments play in moving technology into the marketplace.

Kalorama Information's report, Biotech Funding Deals and Partnerships: Analysis of Recent Venture Capital and Corporate Capital Funding and Other Transactions, provides analysis of both venture and corporate capital funding efforts. In addition, the report looks at other collaborative approaches, including licensing, joint ventures and partnerships aimed at moving product candidates into the marketplace as approved therapies, especially if they address unmet medical needs. The report can be found at KI:http://www.marketresearch.com/redirect.asp?progid=86478&url=http%3A%2F%2Fwww%2Ekaloramainformation%2Ecom%2FBiotech%2DFunding%2DDeals%2D8169354%2F  

Dramatic drop in U.S. IPO activity can't be blamed on tougher regulations

An extensive study of initial public offerings shows dramatic changes in the IPO landscape around the world over the past two decades, including a large decrease in the importance of IPOs in the United States while IPOs became more important in other countries.  This drop in U.S. IPOs cannot be explained by stricter regulations enacted after the corporate and accounting scandals in the early part of the 2000s.

"One of the main things people point fingers at is the Sarbanes Oxley Act. We show that U.S. IPO activity became abnormally low before the Sarbanes Oxley Act was passed," said Craig Doidge, an associate professor of finance at the University of Toronto's Rotman School of Management.

"The declining IPO activity was not caused by the regulatory changes in the U.S. in the early 2000s," said Prof. Doidge, adding that further Investigation Is needed to determine why U.S. IPO dropped so dramatically.

The study looked at data for more than 33,000 IPOs from 88 different countries from January 1990 to December 2011. It found that U.S. IPO activity has "generally not kept pace" with that country's economic importance, and is particularly low among small companies.

Capital raised through IPOs outside of the U.S. increased by 65 per cent from the 1990s to the 2000s. But in the U.S., capital raised through IPOs fell by 8 per cent during that period.

Looking at the actual number of IPOs, if the U.S. was at one time "'the land of the IPO, it is no longer so by the 2000s," the study concludes.  Financial globalization has however benefited other countries, allowing them to overcome challenges to investment caused by weak domestic institutions.

DJX VentureSource European Venture Capital Report 4Q 2013

European Venture Capital Fundraising Rises Significantly from 3Q 2013 and 4Q 2012

23 European venture capital funds accumulated €1.4 billion in 4Q 2013, more than doubling the number of
funds and almost tripling the amount raised from the prior quarter.

In contrast with 4Q 2012, though the number of funds fell by 12%, the amount raised rose by 38%. 4Q 2013
represents the highest quarterly figure for amount raised since 4Q 2011 when €2.1 billion was raised.

The largest fund of the quarter was Abingworth Management’s Bioventures VI fund, which raised €240 million
and accounted for 17% of the total amount raised for 4Q 2013.

Venture capital funds raised a total €3.58 billion across 60 funds in 2013, down 8% and 21% from respective figures for 2012.

Investment into European Venture-backed Companies Sees Quarter over Quarter and Year over Year Increase

European companies raised €1.5 billion for 357 deals during 4Q’13, a 6% uptick in the number of deals
completed and an 18% rise in capital raised from the previous quarter.

In contrast with 4Q‘12, deal flow and investment experienced similar improvements, with increases of 5% and 24% respectively.

A total of €5.6 billion were raised during 2013 as a whole, an improvement of 15% on 2012 and 7% on 2011.

In terms of deal flow, 1395 were completed in 2013, equating to an increase of 6% on 2011 and 2012 figures.

Equity Financings into Europe-based, VC-backed Companies, by Industry Group (4Q 2013)

The Consumer Services sector received the largest allocation of investment during 4Q’13 (37%), accumulating €553 million through 106 deals, an increase of 136% from 3Q’13 in capital raised despite deal flow remaining level.

Healthcare placed second in terms of equity financing, taking a 27% share of all 4Q’13 investment. The sector raised €392 million across 55 deals, a rise of 23% and 31% from respective 3Q’13 figures.

Business and Financial Services occupies third, with companies gathering a 15% share of the total amount
invested during the quarter. The sector received €223 million across 92 deals, an uptick of 3% in deal flow but a drop of 29% in capital raised from 3Q’13.

The Consumer Services sector placed first for euros raised during all of 2013, with €1.5 billion equating to a 28% share of investment for the year. Healthcare companies raised €1.4 billion giving the sector a 25% share, while the Information Technology sector placed third with a 19% share of investment (€1.1 billion).

Equity Financings into Europe-based, VC-backed Companies, by Country (4Q 2013)

The U.K. remained the favoured destination for equity financing in 4Q’13 with a 29%
share of all investment into European VC-backed companies. The country received
€427 million across 91 deals, a drop of 26% and 5% from respective 3Q’13 figures.

Germany consolidated its position in second with a 19% share of investment, raising
€277 million across 66 deals, a 59% increase in euros raised and an 18% rise in deal
flow from the previous quarter.

Sweden climbed to third, thanks in large part to Spotify’s November round of financing,
raising €257 million and representing a 17% share of investment. France,
consequently, dropped to fourth spot with a 10% share. The country raised €144
million during 4Q’13, a 20% decline from the previous quarter.

In 2013 as a whole, the U.K. took a 29% share of investment (€1.6 billion), Germany
an 18% share (€992 million), and France received a 14% share (€785 million).

Venture Exits in Europe Experience Overall Uptick in 4Q 2013 Despite M&A Slide

M&As of venture-backed companies in Europe fell slightly during 4Q’13, by 10% from 3Q‘13 and by 5% from
4Q’12 with a total of 36 transactions completed during the quarter.

The largest M&A of 4Q’13 was for Helsinki-based Supercell Oy, which was acquired by GungHo Online
Entertainment Inc. for €1.1 billion.

145 M&As were completed for venture-backed companies in Europe during 2013, up 1% from the 143
completed during the 2012 but falling 26% from the 197 seen during 2011.

Eight venture-backed IPOs took place during 4Q’13, quadrupling the number completed during 3Q’13 and up
by 60% on 4Q’12. A total of 15 IPOs were completed for the year, level with 2011 but down by one from 2012.

Complete Report

DJX VentureSource U.S. Venture Capital Report for 4Q 2013,

U.S. Venture Investment on the Rise in 4Q 2013

U.S.-based companies raised $8.9 billion from 901 venture capital deals in 4Q 2013, an increase both in capital (2%) and in number of deals (5%) from the previous quarter.

Compared to the same period in 2012, both number of deals and amount invested registered an increase, 3%
and 7% respectively.

Business and Financial Services and Healthcare are the strongest sectors, each having a 26% share of total
amount invested.

In 2013, 3480 deals have been completed raising $33 billion, a respective 5% decrease and 1% increase on
figures posted in 2012.


Equity Financings into U.S.-based, VC-backed Companies, by Industry Group (4Q 2013)

Business and Financial Services saw the largest investment allocation, with 207 deals garnering $2.3 billion and accounting for 26% of total equity investment.

The Healthcare sector raised the second highest proportion of investment for 4Q’13. Healthcare companies
drew $2.3 billion across 188 deals, up 20% and 11% from respective 3Q’13 figures.

Information Technology (IT) placed third with $1.7 billion in 248 deals, dropping significantly from the $2.4 billion accumulated in the previous quarter. The sector’s investment figure represents a 19% share of total equity investment into U.S. VC-backed companies for the quarter.

$1.6 billion were raised by Consumer Services in 177 deals, an increase of 9% in deal flow, while capital invested went up by 3%.

U.S. VC-backed M&As (2011-2013)

U.S. venture capital acquisition activity still on the rise in the fourth quarter of 2013, ending with the highest number of exits for 2013.

115 M&As raised almost $12 billion during 4Q 2013, a 17% increase in M&A valuations despite the number of deals only increasing 1% compared to the previous quarter, when 114 M&As garnered $10.2 billion.

The largest M&A of the quarter was The Climate Corp., which was acquired by Monsanto Co. (NYSE: MON) for
$930 million.

U.S. VC-backed IPOs (2011-2013)

20 venture-backed companies raised $3.6 billion through public offerings in 4Q 2013. Number of deals
decreased by 20%, while capital raised registered a 60% increase from the previous quarter.

The largest IPO of the quarter was Twitter Inc. (NYSE: TWTR), which completed a $1.8 billion IPO.

Complete report

DJX VentureSource 4Q’13 China Venture Capital Report

Venture Capital Investment in China Improves During 4Q 2013

Investment into Chinese venture-backed companies markedly improved in 4Q’13, as companies raised $1.5
billion from 106 deals. The gains equate to a 76% increase in capital and a 16% increase in number of deals from the previous quarter.

Compared to 4Q’12, though deal flow improved by 66%, investment dipped by 4%.

314 deals were completed for China-based VC-backed companies during 2013 as a whole, up 20% on the
figure for 2012 but dropping 22% on the number completed during 2011. In terms of capital raised, $3.5 billion were accumulated during 2013, representing an overall decline of 29% from 2012 and 45% from 2011.

Equity Financings into China-based, VC-backed Companies, by Industry Group (4Q 2013)

Consumer Services companies took $985 million through 47 deals during 4Q’13, a 44% and 66% share of
overall deal flow and capital raised for the quarter respectively. The figures equate to a 52% increase in deal flow and 114% in amount raised for the sector from 3Q’13. The amount raised for the quarter also represents over half of total investment for the sector during 2013.

The Information Technology sector raised the second highest proportion of investment during 4Q’13. IT
companies drew $275 million across 28 deals, representing a drop of 28% in deal flow and 7% in capital raised compared with 3Q’13.

Business and Financial Services companies received $154 million through 18 deals during 4Q’13, an uptick of 38% in deals closed and over 3.5 times the amount raised from 3Q’13. The sector’s investment figure represents a 10% share of total equity investment into China-based VC-backed companies for the quarter.

The Consumer Services sector placed first for dollars raised during all of 2013, with $1.9 billion equating to a 54% share of investment for the year. IT companies garnered $762 million giving the sector a 21% share, while Business and Financial Services and Healthcare placed third and fourth respectively with a 10% ($348 million) and 6% share ($229 million).


Venture M&A and IPO Market Activity in China During 4Q 2013

M&A activity for venture-backed companies in China remained stable in 4Q’13 with five completed, the same as in 3Q’13 and three more than in 4Q’12.

A total of 20 venture-backed M&As were completed in 2013, representing an increase of 82% from the number completed both in 2012 and 2011.

12 VC-backed companies went public during 4Q’13 in China, the highest figure in a quarter since 2Q’12. The largest of these was YuanShengTai Dairy Farm Ltd., which raised $340 million for its November listing on the Hong Kong Stock Exchange.

Complete report