As seed and angel investing has taken off in recent years, and as valuations for young Internet companies have soared to wild heights, the excitement crested last year in a wave of venture-backed Series A investments not seen since 2000.
Early stage dollars and deals recorded 11-year highs in 2011, and this year’s activity could set another high water mark.
U.S.-based early stage venture jumped 47% to $8.3 billion, according to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association (NVCA) based on data from Thomson Reuters (publisher of this blog and Venture Capital Journal). This was well ahead of the 22% rise for overall venture capital investing and more than enough to set a new peak for the decade.
Plus, the number of startups that raised funding rose to 1,414, up 16%, lifting the average amount invested to $5.9 million, also an 11-year high.
This is not to say startup cash is easy or that money is flowing from faucets like a dozen years ago. Competition, in fact, is heated. What’s different now is that investors realize the importance of looking beyond existing portfolios and beyond expensive late stage deals to new bets. There is an extraordinary belief that returns will be concentrated in a few top companies and the race is on to get in at the beginning.
“I don’t care what the [industry] stats say,” Shawn Carolan, a managing director at Menlo Ventures, tells Mark Boslet in the March 2012 VCJ cover story that came out today.
Carolan adds. “I just need to find one awesome company. There will be several of those in the next four to five years.”
Indeed, investors tell Boslet that they believe they can find the next big hit in record time, maybe even the next Facebook.
“Everyone is sensing these things can scale up and become really valuable,” says George Zachary of Charles River Ventures. “People are sensing a changing of the guard.”
To read more about why deal making surged to record levels last year, VCJ subscribers can click here for the full story. The March 2012 Cover Story also includes a list of notable early stage deals from 2011, available for subscribers.