NEW YORK, Oct. 18 -- PricewaterhouseCoopers issued the following news release:
Venture capitalists invested $7.8 billion in 1,005 deals in the third quarter of 2013, according to the MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Quarterly venture capital (VC) investment activity rose 12 percent in terms of dollars and 5 percent in the number of deals compared to the second quarter of 2013 when $7.0 billion was invested in 956 deals. When compared to the first three quarters of 2012, both the dollar and deal totals for the first three quarters of 2013 track slightly higher, however the dollar and deal totals for the first three quarters of 2011 exceed those of 2013.
The Software industry received the highest level of funding in the third quarter of 2013, exceeding the $3 billion mark for the first time in 12 years with $3.6 billion flowing into the sector during the quarter. The Software industry also counted the most deals in Q3 at 420, a 23 percent increase from the 342 rounds completed in the second quarter of 2013. Nine of the 11 largest investments in Q3 went into Software companies.
"It's an exciting time to be an entrepreneur with a software company," remarked Mark McCaffrey, global technology partner and software leader at PwC US. "More venture capital dollars are going into more software deals than we've seen in the past decade. The continued increase in valuations for innovative and disruptive technologies in software-related companies, coupled with the increase in exit activity, is driving venture capitalists to make more investments in this space. And, at the current pace of investing, we should see total venture capital investments in 2013 exceed the annual total from 2012."
"With more than half of this quarter's deals coming from early and seed stage deals, there's credible reason to be optimistic about the future of innovation and the vibrancy of the startup ecosystem. Software is a natural increased area of focus given that many tech deals are less capital intensive to get to proof of concept," said John Taylor, head of research at the NVCA. "We are balancing this optimism, however, against the recognition that VCs are still trying to gain exits for the previous generation of companies. There is some improvement on that front but we would like to see it strengthen even further," Taylor added.
While a distant second, the Biotechnology industry was the second largest sector for dollars invested with $852 million going into 123 deals, falling 39 percent in dollars but rising 10 percent in deals from the prior quarter. The Medical Device industry received the third largest investment total in Q3 with $566 million going into 65 deals, which represented a 12 percent increase in dollars but an 8 percent decline in deals. Investments in the Life Sciences sector overall (Biotechnology and Medical Devices) dropped 26 percent in dollars but rose 3 percent in deals. Looking at the first three quarters of the year, overall Life Science investing remains depressed with 541 deals reported in 2013, marking the lowest nine month total since 2005. The Media & Entertainment industry received the fourth largest investment total in Q3 with $541 million going into 100 deals.