Silicon Valley’s early stage deals (defined as angel, seed and Series A deals) ticked up in Q1 2014 and focused on enterprise technology. While overall deal levels kept pace with the previous year’s levels (204 deals in Q1 2014 vs 198 in Q1 2013), the funding to early stage deals did jump indicating larger early-stage deal sizes.
Q1 has been the slowest each year in terms of total dollars invested in the early-stage in Silicon Valley dating back to 2011 so this was a departure from that trend as well.
Leading Sub-Industries Point Towards B2B Investments
As might be expected, early-stage deals in Silicon Valley in the past quarter spanned a wide variety of industries with internet & mobile deals making up the bulk of the transactions (74% of deals). The top two sub-industries were Business Intelligence, Analytics, & Performance Management (14 deals), which featured startups such as ThoughtSpot, OneFold, and Mohound, and Customer Relationship Management (11), which included Tactile, Linko, and Frontleaf. The focus of investments in companies servicing enterprise clients points towards a continued emphasis on the B2B/enterprise sector by venture capitalists.
Average Investment Size Climbs
On a deal count basis, accelerators such as 500 startups and Y Combinator as might be expected completed the most early-stage investments in Silicon Valley this past quarter. VCs leading the pack in terms of deal activity were also many of the familiar names including SV Angel, Andreessen Horowitz, Khosla Ventures and Google Ventures who each participated in 7 or more early stage deals in the quarter.
Q1 2014 saw early-stage startups raising, on average, more money per deal year-over-year ($4.28M in Q1 2014 vs. $3.11M in Q1 2013). With more investors piling in at the early stages, deal sizes are climbing. It will be interesting to see if the average early-stage deal sizes continue to trend up in subsequent quarters.
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