Venture Capital Today: Key Numbers to Remember

Nov 24, 2009 –

If you’re an entrepreneur who is looking to bring your business to the next level, venture capital is often a smart and logical choice.  However, securing investment is no easy task.  That’s why it’s important to research venture capital firms, refine your pitch, and finally, understand where venture capital money is flowing and where it is drying up.

Luckily, most of that information is readily available.  Every quarter, PricewaterhouseCoopers provides a thorough MoneyTree report on the state of the venture capital industry, utilizing data from Thompson Reuters.  The result is very detailed information that helps us understand trends in venture capital.

Here are what I believe are the key numbers and trends to discern from the Q3 report.  Hopefully this data will help you figure out which industries are hot, who to approach, and what to expect from venture capitalists as we approach 2010: 

1.     $4.8 billion in venture capital was invested in total in Q3 2009.  This is up from a low point of $3.32 billion in Q1 2009, but well below the $7.16 billion invested in Q3 2008. 

2.     There were 637 investments in Q3 2009.  This is down from the 994 investments of Q3 2008 and, in fact, amounts to a 3% drop in investments from the second quarter of 2009.

3.     The average deal in the third quarter of 2009 was worth $7.54 million.

4.     Biotechnology led venture capital investments in Q3 2009 with $905 million.  Not far behind was Industrial/Energy, Software, and Medical Devices.  Biotechnology saw 104 deals.

5.     Internet-specific companies received $843 million through 148 deals in Q3 2009. Financial investment increased by 42% from Q2 2009, indicating that the Web is recovering from the recession as well.

6.     Seed funding is growing.  $1.6 billion of venture capital in Q3 2009 came from seed and early-stage funding, which represents an 11% growth from last quarter.  While most people think of seed funding as small investments that can start as low as a couple hundred thousand dollars, the truth is that the average seed investment is around $5.9 million today, which is actually down from the $9.6 million average of Q2 2009.

7.     First-time deals are getting smaller.  In Q3 2008, the average first-round deal was $5.1 million.  In Q3 2009, it’s $4.1 million, nearly a 20% decrease.

8.     Silicon Valley is recovering. In Q3 2009, Silicon Valley saw a 63% increase in investments from Q2 2009, amounting to $2.2 billion being invested in the technology capital of the world.

9.     Around half of the most active venture capital firms are in Silicon Valley. According to the PriceWaterhouseCoopers/MoneyTree report, around 29 of the 59 firms with five or more deals in Q3 2009 were from Silicon Valley.  However, with 20 deals, New Enterprise Associates in Baltimore, MD led the list.

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Great summary as we approach 2010