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

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Venture capital (VC) investment experienced the strongest quarter in terms of dollars invested since the fourth quarter of 2000, after an exemplary first quarter and an overall remarkable 2014 as both dollars invested and number of deals reached levels not seen in over a decade.
July 30, 2015

Venture capital (VC) investment experienced the strongest quarter in terms of dollars invested since the fourth quarter of 2000, after an exemplary first quarter 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 increased about 30% in the second quarter of 2015 to $17.5 billion, up from $13.4 billion in the first quarter. Consistent with the impressive quarterly increase is an impressive 28% year-over-year jump.

Compared to the first quarter of 2015, the average deal size was up a bit in the second quarter ($12.9 million vs. $14.7 million, respectively). Overall the trend towards larger deals continues as deal sizes in 2014 and Q1 and Q2 of 2015 are significantly higher than long term averages. This trend of bigger deals is highlighted by some of the second quarter’s “mega-deals.” Airbnb, Wish and Zenefits lead the way in the U.S. Venture Capital deals, grabbing spots in the top 10 biggest VC funding deals of all time. Airbnb, now tied with Facebook for the largest funding deal in U.S. history, raised $1.5 billion while the others raised $500 million each.

There were 1,189 deals completed in the second quarter of 2015, compared to 1,048 in the first quarter.

Seed funding experienced a bump up from $91 million in the first quarter of 2015 to $169 million in the second quarter and but continues to have the lowest percentage of investment when compared to early, expansion and late stage funding.

The software industry continues to attract the biggest percentage of VC investment. Software accounted for 42% of investment in 2014 and the first two quarters of 2015 (see our 2014 Venture Capital Investment: Year in Review). Software led the second quarter of 2015 investment with $7.3 billion spread among 491 deals. Media and Entertainment jumped from fourth to second place with 127% growth and $2.7 billion in funding, pushing Biotech’s $2.3 billion to third.

 

 

 

Geographically, California (1) and New York (2) lead the nation in VC investment. California received $10.6 billion in VC funding, spread over 496 deals (about $21.5 million per deal). New York received almost $2.1 billion in VC funding, averaging $17.4 million per deal over 120 deals.

Colorado, Kansas and, Missouri, ranked 5th, 23rd, and 28th, respectively, in amounts invested. These rankings are up from 12th, 39th, and 33rd in the first quarter. The following table highlights the second quarter 2015 VC investment for these selected states:

 

 

 

Colorado, Missouri and Kansas all experienced substantial increases in investment after a disappointing first quarter with optimism in Kansas increasing after a large deal.

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.


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; Networking and Equipment; Retailing/Distribution; Semiconductors; Telecommunications; and Other.

 

Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

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