Venture capitalists invested $12.1 billion in 969 deals in the first quarter of 2016, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.
Total venture dollars deployed to startup companies for the quarter remained flat and total deal count was down 5%, compared with the fourth quarter when $12.0 billion was invested in 1,021 deals. Compared with Q1 2015, dollars and deals are both down 11%. This is the ninth consecutive quarter of more than $10 billion in venture capital invested in a single quarter.
The top 10 deals accounted for 25% of total dollars invested in the first quarter, up from 18% of total venture capital deployed during the fourth quarter. Compared to the fourth quarter, the first quarter’s top 10 deals came from a diverse range of industries, though it also saw investments in categories not featured last quarter—Computers and Peripherals and Industrial/Energy.
The Software industry continues to receive the highest level of funding of all industries, receiving $5.1 billion going into 376 deals for the quarter, a 12% increase in dollars and a 5% decrease in deals versus the fourth quarter of 2015. Half of the top 10 megadeals (investments of $100m or more) were in the Software industry.
The Biotechnology industry received the second largest amount of venture capital for the quarter, with $1.8 billion going into 118 deals, representing an 11% increase in dollars and a 19% increase in deals, compared with the previous quarter. Investments in the Life Sciences sector (Biotechnology and Medical Devices combined) during the first quarter accounted for $2.3 billion going into 177 deals, staying flat in dollars and declining 3% in deals. Investments in Life Sciences companies accounted for 19& of all venture capital deployed to the startup ecosystem in the first quarter.
Media & Entertainment companies received the third largest amount of venture capital for the quarter with $930m deployed across 109 deals. Notably, Computers and Peripherals companies received the fourth largest amount of venture capital for the quarter with $871m deployed across 14 deals, a 477% increase in dollars compared to the fourth quarter. The second largest deal of the top 10 megadeals was within the Computers and Peripherals space.
Ten of the 17 MoneyTree industries remained flat or saw increases in dollars invested in the first quarter, including Telecommunications (157% increase), Electronics/Instrumentation (118% increase), and Business Products and Services (107% increase).
Venture capitalists invested $2.4 billion into 232 Internet-Specific companies – with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category – during the first quarter of 2016, dropping 24% in dollars and 4% in deal count, compared with the fourth quarter of 2015 when $3.1 billion went into 242 deals.
Stage of Development
Dollars invested in Seed stage companies declined 10% during the first quarter, totaling $418m in 62 deals and representing 3% of all venture investment dollars for the quarter and 6% of all deals. Early stage investment declined 18% in dollars and 22% in deals with $4.2 billion going into 406 deals. Seed/Early stage deals accounted for 48% of total deal volume in the first quarter, compared with 57% in the prior quarter. The average Seed stage deal in the first quarter was $6.7m, down from $8.2m in the fourth quarter. The average Early stage deal in the first quarter was $10.3 million, up from $9.8m in the prior quarter.
Expansion stage investment was up 25% in dollars and 9% in deals for the quarter, at $4.1 billion and 288, respectively, from the previous quarter. Expansion stage deals accounted for 30% of all venture deals in the first quarter. The average Expansion stage deal was $14.1 million, up from $12.3 million in the fourth quarter.
Investments in Later stage companies increased 10% to $3.5 billion going into 213 deals in the first quarter. Later stage deals accounted for 22% of total deal volume for the quarter and increased 20% in deals. The average Later stage deal in the first quarter was $16.3m, down from $17.7m in the prior quarter.
First-time financing (companies receiving venture capital for the first time) dollars decreased 31% to $1.7 billion in the first quarter as the number of deals declined by 16% to 297. First-time financings accounted for 14% of all dollars and 31 percent of all deals in the first quarter.
Of the companies receiving venture capital funding for the first time in the first quarter, Software companies captured the largest share, accounting for 39% of the dollars and 41% of the deals with $666m going into 121 deals. First-time funding in the Life Sciences sector during the first quarter was down 29 in dollars and 37% in deals, dropping to $404m going into 33 deals.
The average first-time deal in the first quarter was $5.7m, down from $6.9m in the prior quarter.