Software Sector Leads Pack in 2Q Venture Funding and Biotech Sector Finishes Second

by McDonnell Boehnen Hulbert & Berghoff LLP
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NVCALast week, 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 second quarter of 2014.  The report, which is prepared by the NVCA and PriceWaterhouseCoopers LLP using data from Thomson Reuters, indicates that venture capitalists invested $12.968 billion in 1,114 deals in the second quarter, which constituted a 34% increase in dollars and a 13% decrease in deals as compared with the first quarter of 2014, when $9.710 billion was invested in 985 deals (see chart below, which shows total venture funding from the first quarter of 2011 through the second quarter of 2014; data from MoneyTree Reports; click on chart to expand).  The nearly $13 billion invested in the second quarter was the highest quarterly total since the fourth quarter of 2000, and comes on the heels of a first quarter which saw funding at its highest levels in thirteen years.

Total Funding Q1-2011 to Q2-2014


PricewaterhouseCoopers (PWC)Venture funding in the biotechnology sector rose from $1.090 billion in the second quarter of 2014 to $1.840 billion in the second quarter of 2014 (see chart below, which shows venture funding for the biotech (blue), medical devices (red), and software (green) sectors since the first quarter of 2011; data from MoneyTree Reports; click on chart to expand).  In addition to experiencing a 69% increase in dollars, the biotech sector also saw a 7% increase in deals, with 122 deals in the second quarter of 2014.  Funding in the biotech sector was also up from the second quarter of 2013, when $1.469 million was invested.

Industry Funding Q1-2011 to Q4-2014

While the biotech sector secured enough funding to place second among the seventeen sectors tracked by the NVCA, the biotech sector received only 30% of the $6.060 billion in funding that was poured into the software sector in the second quarter -- only the fourth time since 1995 that the software sector broke the $6 billion mark in a single quarter.  The software sector has now captured the top spot for nineteen straight quarters, with the biotech sector finishing second in all but two of those quarters (the industrial/energy sector knocked the biotech sector to third in the second quarter of 2010 and first quarter of 2011), and the software sector has received more than $2 billion in funding for nine consecutive quarters.

Medical device and equipment investment increased by 8% with respect to dollars and deals in the second quarter, with $649 million being invested in 73 deals.  However, in contrast with the three sectors above, nine of the seventeen sectors tracked by the NVCA saw decreases in dollars invested in the second quarter.

NVCA President and CEO Bobby Franklin noted that "[n]ot since the early 2000s have we witnessed this level of quarterly investment activity," adding that "[b]efore alarmists declare a repeat of the dot-com bubble, it's important to keep in mind that a lot of this activity was driven by a handful of eye-popping investment rounds, including a record-setting funding round of $1.2 billion."

For additional information regarding this and other related topics, please see:

• "Software Sector Leads First Quarter Venture Funding to Thirteen Year High; Biotech Sector Finishes Second (Again)," April 30, 2014
• "Biotech Venture Funding Rebounded in 2013 After Strong Fourth Quarter," January 26, 2014
• "Biotech Venture Funding Sees Second Quarter Rebound," July 22, 2013
• "Biotech Venture Funding Down 33% in First Quarter," April 30, 2013
• "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

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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