Earlier this month, the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, released the results of its MoneyTree Report on venture funding for the first quarter of 2013. The report, which is prepared by NVCA and PriceWaterhouseCoopers LLP using data from Thomson Reuters, indicates that venture capitalists invested $5.9 billion in 863 deals in the first quarter, which constituted a 12% decrease in dollars and a 15% decrease in deals as compared with the fourth quarter of 2012, when $6.7 billion was invested in 1,013 deals (see chart below; data from MoneyTree Reports).
Investment in the life sciences sector (which combines the biotechnology and medical device industries) experienced an even bigger decline, with funding dropping by 28% and the number of deals decreasing by 23%. Although the biotechnology industry ranked second in terms of dollars invested, with $875 million going into 96 deals, biotechnology funding dropped 33% in terms of dollars and 30% in terms of deals from the fourth quarter of 2012. The software industry ranked first among all industries with $2.3 billion being invested in 329 deals in the first quarter, which marked the fourth straight quarter in which that industry topped $2 billion in funding. Overall, eleven of the seventeen sectors tracked by the NVCA saw decreases in dollars invested in the first quarter.
NVCA head of research John Taylor indicated that the decreased investment in the first quarter was not unexpected. He noted that "[t]he venture industry has been raising less capital than it has been investing now for several years," adding that "we are seeing less money going into traditionally capital-intensive sectors such as clean tech and life sciences, especially in first-time deals." Tracy Lefteroff, the global managing partner of the venture capital practice at PricewaterhouseCoopers, noted that "[t]he bright spot in the first quarter was Software," pointing out that "[t]hese capital-efficient companies that have shorter time frames to a liquidity event -- whether that is M&A or IPO -- continue to be attractive to an ever-shrinking pool of VC funds."
For additional information regarding this and other related topics, please see:
• "Annual Venture Funding Drops for First Time in Three Years," February 4, 2013
• "Biotech Venture Funding Up 64% in Third Quarter," October 29, 2012
• "Venture Funding in Life Sciences Sector Drops 9% in Second Quarter," July 22, 2012
• "Biotech Venture Funding Drops 43% in First Quarter," May 3, 2012
• "Venture Funding Increased 22% in 2011," February 2, 2012
• "Life Sciences Venture Funding Drops in Third Quarter," October 27, 2011
• "Life Sciences Venture Funding up 37% in Second Quarter," August 1, 2011
• "VentureSource Reports 35% Increase in 1Q Venture Funding," April 26, 2011
• "NVCA Reports Modest Gains in First Quarter Venture Funding," April 19, 2011?
• "NVCA Reports 31% Drop in Venture Funding for Third Quarter," October 17, 2010?
• "NVCA Reports 34% Increase in Venture Funding for Second Quarter," July 22, 2010?
• "NVCA Report Shows First Quarter Drop in Venture Funding," April 20, 2010?
• "Biotech/Pharma Financing Improving, R&D Spending Up," August 31, 2009
• "NVCA Study Shows Increase in Third Quarter Venture Funding," October 23, 2009?
• "First Quarter Venture Capital Funding at 12-Year Low," April 23, 2009?
• "NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech Rebound in 2009," February 16, 2009