Contact Information: Contacts: Emily Mendell National Venture Capital Association 610-565-3904 Lisa Peterson Porter Novelli for PricewaterhouseCoopers 512-241-2233 Clare Chachere PricewaterhouseCoopers 512-867-8737
2009 Venture Investment Declines to Lowest Levels in More Than a Decade
Despite Lower Investment Across Industry Sectors, Fourth Quarter Offers Promise for Coming Year
| Source: National Venture Capital Association
WASHINGTON, DC--(Marketwire - January 22, 2010) - Venture capitalists invested $17.7 billion
in 2,795 deals in 2009, marking the lowest level of dollar investment since
1997, according to the MoneyTree Report by PricewaterhouseCoopers and the
National Venture Capital Association (NVCA), based on data from Thomson
Reuters. Venture investments in 2009 represented a 37 percent decrease in
dollars and a 30 percent decrease in deal volume from 2008. It was the
second consecutive year of annual deal and dollar declines. Investments in
the fourth quarter of 2009 totaled $5.0 billion in 794 deals, a 2 percent
decline in dollars but a 15 percent increase in deals from the third
quarter of 2009 when $5.1 billion went into 689 deals.
Double digit declines in investments were spread across almost every
industry including Clean Technology, Life Sciences and Software.
Investment dollars also fell across every stage of development category,
with the exception of a 2 percent increase in Seed Stage investments.
First-time financings fell to the lowest dollar and deal level since the
MoneyTree began reporting venture capital investing in 1995. However,
fourth quarter investing did show increases in the number of first-time and
Early Stage deals completed, potentially marking the beginning of an uptick
in investment levels for 2010.
"The venture capital industry had no choice but to slow the investment pace
in 2009," said Mark Heesen, president of the NVCA. "The weak exit
environment resulting from an unstable public market combined with a
challenged limited partner base sent a strong message to the venture
community to pull back the reins -- and the VCs listened. Now that the
economy has begun to show signs of improvement, we expect to see dollars
flow more freely back into those sectors that offered the most promise
before the recession began -- clean technology, life sciences and IT. The
Seed and Early Stage pipeline needs replenishing across all industries and
the health of the start-up community in the next decade will be dependent
upon more robust first-time financings. Twenty-ten should be the year to
begin that process in earnest."
"Despite the overall drop in funding in 2009, VCs placed more bets in the
fourth quarter of 2009 than we've seen all year," noted Tracy T. Lefteroff,
global managing partner of the venture capital practice at
PricewaterhouseCoopers LLP. "They're investing fewer dollars in these
companies but the fact remains that there are still entrepreneurs out there
with great ideas who are getting the opportunity to take the next step
forward with their businesses. This can be clearly seen by the increase in
the number of Seed Stage companies receiving funding in 2009, compared to
those in the Expansion and Later Stages of development, which dropped by
close to half. VCs continue to place their bets in areas of promising
growth especially in the Life Sciences sector, which accounted for
one-fourth of all deals in the fourth quarter of 2009."
Sector and Industry Analysis
While Biotechnology investing declined in 2009 by 19 percent in both
dollars and deals, it did become the single largest investment sector for
the year in terms of dollars with $3.5 billion going into 406 deals. For
the fourth quarter, Biotechnology investing increased 10 percent in dollars
and fell 4 percent in the number of deals from the third quarter with $1.0
billion going into 108 rounds. Biotech was also the number one sector for
dollars invested in Q4 and the only industry sector receiving more than $1
billion in the fourth quarter. The Medical Device sector fell 27 percent
in dollars and 19 percent in deals in 2009, finishing the year as the third
largest sector with $2.5 billion going into 309 deals. For the fourth
quarter, Medical Devices saw an increase of 13 percent in dollars and 18
percent in deals from Q3 09 with $719 million going into 87 deals. The
Life Sciences sector (Biotech and Medical Devices combined) accounted for
34 percent of all venture capital dollars invested in 2009 compared to 28
percent in 2008.
Software investing increased in the fourth quarter of 2009 to the highest
quarterly deal and dollar level for the year with $959 million going into
177 deals. For the full year, venture capitalists invested $3.1 billion
into 619 deals, a 40 percent decline in dollars and a 35 percent decline in
deals from 2008 when $5.1 billion went into 948 deals. For the year,
Software remained the largest single industry category in terms of deal
volume and second largest behind Biotechnology in terms of dollars.
The Clean Technology sector experienced a significant decline in 2009 with
$1.9 billion invested in 185 deals. This investment level represents a 52
percent decrease in dollars and a 31 percent decline in deal volume from
2008 when $4.0 billion was invested in 268 deals. Clean Technology
investing accounted for 11 percent of all venture capital dollars in 2009
compared to 14 percent in 2008. In the fourth quarter, venture capitalists
invested $385 million into 47 Clean Tech deals, a 58 percent drop in
dollars and 13 percent drop in deals from the third quarter of 2009 when
$926 million went into 54 deals. Clean Technology crosses traditional
MoneyTree industries and comprises alternative energy, pollution and
recycling, power supplies and conservation.
Internet-specific companies also saw a decline in investing in 2009. The
$2.9 billion going into 629 deals in 2009 represented a decline of 39
percent in dollars and 30 percent in deals from 2008 when $4.8 billion went
into 902 companies. For the fourth quarter, Internet-specific investment
increased 20 percent in deals and 14 percent in dollars with $908 million
going into 187 deals compared to $795 million going into 156 deals in the
third quarter of 2009. 'Internet-specific' is a discrete classification
assigned to a company whose business model is fundamentally dependent on
the Internet, regardless of the company's primary industry category. These
companies accounted for 17 percent of all venture capital dollars in 2009,
approximately the same percentage as in 2008.
With the lone exception of Networking and Equipment, which experienced a 5
percent decline in dollars in 2009, every industry category had double
digit declines for the year. Industry sectors experiencing the biggest
dollar declines in 2009 included: Telecommunications (-67 percent);
Semiconductors (-53%); and Industrial/Energy (-50 percent). The Media &
Entertainment industry decreased 32 percent in terms of dollars and 38
percent in terms of deals with $1.2 billion going into 251 deals in 2009.
Despite annual declines, 11 out of 17 industry sectors experienced fourth
quarter increases in dollar investing.
Stage of Development
Investments into Seed Stage companies increased 2 percent in terms of
dollars but fell 37 percent in terms of deals with $1.7 billion going into
312 companies in 2009. For the fourth quarter, venture capitalists
invested $390 million into 91 Seed Stage companies, an 18 percent decrease
in dollars and a 2 percent increase in deals compared to the third quarter
of the year. Seed Stage companies attracted 9 percent of dollars and 11
percent of deals in 2009 compared to 6 percent of dollars and 12 percent of
deals in 2008.
Early Stage investments fell by 13 percent in terms of dollars and 17
percent in terms of deals in 2009 to $4.6 billion into 883 deals. However,
for the fourth quarter, Early Stage deals experienced double digit
increases with $1.6 billion going into 277 deals, a 32 percent increase in
dollars and 26 percent increase in deals from Q3. Early Stage companies
attracted 26 percent of dollars and 32 percent of deals in 2009 compared to
19 percent of dollars and 27 percent of deals in 2008.
Expansion Stage investments decreased in 2009 by 47 percent in dollars and
35 percent in deals with $5.5 billion going into 801 deals. Expansion
funding declined in terms of dollars in the fourth quarter, dropping 6
percent from the prior quarter to $1.6 billion. The number of deals,
however, increased during the quarter, improving 19 percent to 234.
Expansion Stage companies attracted 31 percent of dollars and 29 percent of
deals in 2009 compared to 37 percent of dollars and 31 percent of deals in
2008.
In 2009, $5.9 billion was invested into 799 Later Stage deals, a decline of
44 percent and 33 percent, respectively, for the year. For the fourth
quarter, $1.5 billion went into 192 deals, which represents a 5 percent
increase in terms of deals but a 16 percent decline in terms of dollars
from the third quarter of 2008. Later Stage companies attracted 33 percent
of dollars and 29 percent of deals in 2009 compared to 38 percent of
dollars and 30 percent of deals in 2008.
First-Time Financings
First-time financings fell to the lowest annual levels since the MoneyTree
began reporting in 1995. Just $3.4 billion went into 725 deals in 2009, a
45 percent decline in dollars and a 40 percent decline in deals. However,
the dollar level and number of companies receiving venture capital for the
first time increased in the fourth quarter by 51 and 37 percent,
respectively, over the third quarter to $1.1 billion into 230 companies.
This quarter was the first in 2009 in which first-time financings exceeded
one billion dollars.
Industries receiving the most dollars in first-time financings in 2009 were
Biotechnology, Industrial/Energy and Software. Industries with the most
first-time deals in 2009 were Software, Media/Entertainment, and
Biotechnology.
Forty-seven percent of first-time deals in 2009 were in the Early Stage of
development followed by the Seed Stage of development at 26 percent,
Expansion Stage companies at 17 percent and Later Stage companies at 10
percent.
MoneyTree Report results are available online at www.pwcmoneytree.com and
www.nvca.org.
The National Venture Capital Association (NVCA) represents more than 420
venture capital firms in the United States. NVCA's mission is to foster
greater understanding of the importance of venture capital to the U.S.
economy, and support entrepreneurial activity and innovation. According to
a 2009 Global Insight study, venture-backed companies accounted for 12.1
million jobs and $2.9 trillion in revenue in the U.S. in 2008. The NVCA
represents the public policy interests of the venture capital community,
strives to maintain high professional standards, provides reliable industry
data, sponsors professional development, and facilitates interaction among
its members. For more information about the NVCA, please visit
www.nvca.org.
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