Report Cites Drop In First-Quarter VC Deals
Venture capital investment activity fell 15 percent in the first quarter of this year, representing a 12-percent drop in value, according to a report released today by PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA).
Venture capitalists in the U.S. invested $5.9 billion in 863 deals, the report said, down from $6.7 billion that was invested in 1,013 deals.
The life sciences (biotechnology and medical device industries combined) and clean technology sectors both saw marked decreases in both dollars and number of deals in the first quarter, according to the two organizations. However, there were notable percentage increases in dollars invested in the media and entertainment industry, while the software industry accounted for 40 percent of amount invested in the quarter.
In New England, investments in software ventures rose nearly 15 percent to $265.4 million. Investments in medical devices and equipment plunged from $138.5 million to $88.2 million, but biotech investments were up slightly, from $206.9 million to $207.2 million.
The overall drop was not a surprise.
"Lower investment levels in the first quarter were driven by a number of factors, none of which were unexpected," said John Taylor, head of research for NVCA. "The venture industry has been raising less capital than it has been investing now for several years, and ultimately this dynamic flows through and manifests itself in lower investment levels overall.
"Additionally, we are seeing less money going into traditionally capital-intensive sectors such as clean tech and life sciences, especially in first-time deals," he added. "(Also) the majority of deals are being done in the capital-efficient IT sector where rounds' amounts are lower."
Taylor said NVCA expects these trends to continue "until exits and subsequent fundraising activities pick up, and dollars start to flow back into more venture funds."
Among the top 10 deals in New England, one involved a Central Massachusetts firm, according to data provided as part of the report. Boston-Power Inc. of Westborough was given $22 million by Oak Investment Partners of Greenwich, Conn., and an undisclosed firm. Boston-Power, which makes lithium-ion batteries, announced in 2011 that it would invest in production operations in China, fueled by a venture investment of $125 million by three firms, plus Chinese government incentives. The company moved 30 jobs from Massachusetts to China and said it planned to create hundreds more there.
WBJ Web Partners
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