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Focus on Life Sciences & Technology: 2015 Venture Capital Investment - First Quarter Update

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Venture capital (“VC”) investment experienced pull back in the first quarter, following an exceptional 4nd quarter last year and an overall remarkable 2014 as both dollars invested and number of deals reached levels not seen in over a decade  (see our 2014 Venture Capital Investment: Year in Review).  According to the PricewaterhouseCoopers / National Venture Capital Association MoneyTree™ Report, VC activity in the United States decreased about 10% in the first quarter of 2015 to $13.4 billion, down from $14.9 billion in the fourth quarter of 2014.  Although, a substantial decrease from the fourth quarter, market participants can still be optimistic as activity in the first quarter is up 26% year-over-year.
April 30, 2015

Venture capital (“VC”) investment experienced pull back in the first quarter, following an exceptional 4nd quarter last year and an overall remarkable 2014 as both dollars invested and number of deals reached levels not seen in over a decade  (see our 2014 Venture Capital Investment: Year in Review).  According to the PricewaterhouseCoopers / National Venture Capital Association MoneyTree™ Report, VC activity in the United States decreased about 10% in the first quarter of 2015 to $13.4 billion, down from $14.9 billion in the fourth quarter of 2014.  Although, a substantial decrease from the fourth quarter, market participants can still be optimistic as activity in the first quarter is up 26% year-over-year.  The average deal size was down a bit in the first quarter of 2015 from the fourth quarter of 2014 ($13.2 million vs. $13.5 million, respectively) but overall the trend towards larger deals continues as deal size in 2014 and the first quarter of 2015 are significantly higher than long term averages.  The decline in overall dollars invested and deal size is due, in part, to 2014 being the year of “mega-deals.”  In 2014, Uber, Magic Leap, Snapchat, and Airbnb cracked the Top 10 U.S. Venture Capital deals with investments of $1.2 billion, $542 million, $486 million, and $475 million, respectively.  There was a total of 1,020 deals completed in the first quarter of 2015, compared to 1,103 in the fourth quarter of 2014.  Seed funding dropped off from $186.3 million in the fourth quarter of 2014 to $125.8 million in the first quarter of 2015 and continues to account for the least amount of investment when compared to early, expansion, and late stage investments.

The software industry continues to lead in attracting VC investment, and its overall share has increased from the fourth quarter of 2014.  In the first quarter of 2015, software accounted for 42% of the investment, up from 40% in the fourth quarter of 2014, but in line with the 42% for all of 2014 (see our 2014 Venture Capital Investment: Year in Review).   Software led the first quarter of 2015 investments with $5.6 billion spread among 434 deals.  Biotechnology remains in second place with $1.7 billion in investment, followed by Industrial/Energy with $1.4 billion in investment.  


 


Geographically, California (1) and Massachusetts (2) lead the nation in VC investment.  California received $8.0 billion in VC funding, spread over 420 deals (about $19.1 million per deal).  Massachusetts received almost $1.4 billion in VC funding, averaging $13.4 million per deal over 101 deals.  

Colorado, Missouri, and Kansas ranked 11th, 32th, and 38th, respectively, in amounts invested.  The following table highlights the first quarter 2015 VC investments for these selected states:

 

For Kansas, this level of activity represents an increase from the fourth quarter of 2014.  Missouri and Colorado saw a decrease in overall investment.

 

We will continue to monitor the levels and trends in VC investment and what they mean for life sciences and technology related industries and the overall economy.  RubinBrown has a dedicated Life Sciences and Technology Services Group that works with local, national, and international companies to provide advisory, assurance, and tax services for entities participating in or supporting life sciences and technology industries.

 


 1 The MoneyTree™ Report provides definitions for each industry classification.  All Other Industries includes the twelve other MoneyTree™ Report industries of: Business Products and Services; Computers and Peripherals; Consumer Products and Services; Electronics/Instrumentation; Financial Services; Healthcare Services; Industrial/Energy; Networking and Equipment; Retailing/Distribution; Semiconductors; Telecommunications; and Other. 

 

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