Last year’s public market volatility could be the cause. Or it could be another sign the venture business’s consolidation. Fundraising by new and follow-on funds remains pretty tepid.
Another possibility is that it is simply a pause in an otherwise steady market, one that the vitality of this year’s IPO market will swiftly help reverse.
We at peHUB decided to take a closer look at the first quarter trends hoping for insight about the quarters ahead. As usual, numbers don’t tell the whole story. But here are several observations drawn from the investment data released late last week in the MoneyTree Report from PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters, publisher of this blog.
Investment Slowdown Could Pass: First quarter investments of $5.76 billion fell back to almost the level of the fourth quarter of 2010 when a slowing economy created unease about conditions ahead. Despite a soft economy, investing picked up in the following two quarters as the IPO market improved.
This year’s improving IPO market and the steadier economy should lead investments higher in the second quarter.
Later Stage Shift: The first quarter saw a shift to later stage deals. Almost 40% of dollars went in this direction and only 28% to early stage companies. This is a significant change from the fourth quarter, when 33% of dollars went to early stage deals and 29% to late stage.
It is quite likely investors will continue to favor late stage investments in the current quarter hoping to make a buck on IPOs. Already there is a lot of competition for the best of these transactions.
Internet Investing Will Steady: Finally, Internet investments continued a three-quarter trend in the first quarter lower. With the excitement over deals such as Facebook’s purchase of Instagram, I don’t see it going much lower. Expect to see an uptick in the second quarter.
What follows is a slideshow of first quarter investment trends so that you can make some predictions of your own. The figures come from the MoneyTree Report.
(Image above of fortune teller courtesy of Shutterstock.)
[slide title=”U.S. Venture Investments By Quarter “]
[slide title=”First Quarter Venture Investment Dollars By Stage”]
[slide title=”First Quarter Venture Deals By Stage”]
[slide title=”Venture Investments In Internet Focused Companies”]
[slide title=”Venture Investments In Software Companies”]
[slide title=”Venture Investments In Biotech Companies”]
[slide title=”Venture Investments In Medical Devices And Equipment Companies”]
[slide title=”Venture Investments In Cleantech Companies”]