After Q2’14 saw venture capital investment hit its highest quarterly mark since Q1’01, there was no such step-up in Q3’14 as funding dropped 30%, while deal levels fell 10%. Still, the first three quarters of 2014 saw U.S. VC funding leap to $33.75B, which represents an eye-popping increase of 59% compared to the first nine months of last year. The absence of an Uber-like deal served to lower the funding tally in Q3.
On the exit front, the IPO market for VC-backed companies fell off significantly in Q3. Just 18 U.S.-based VC-backed companies went public in Q3, compared to 35 in Q1 and 24 in Q2. The much anticipated Alibaba IPO may have inhibited some IPO activity in Q3 so it will be interesting to see if VC-backed IPOs get their mojo back in Q4.
VC-backed IPO pace slumps in Q3
The IPO market for VC-backed companies fell off significantly in Q3. 18 U.S.-based VC-backed companies went public in Q3, compared to 35 in Q1 and 24 in Q2. Meanwhile, just one US-based tech company, TubeMogul, went public in Q3 as the healthcare sector took a whopping 83% of all quarterly VC-backed IPO activity. Call it the Alibaba chokepoint?
Prior to break-up, Atlas Venture gets busy
NEA led VC investors by U.S. deals in Q3 2014 including Jet.com, DataRobot and Branch Metrics among others. Atlas Venture, which is splitting its life sciences and tech arms, ranked in the top 3 most active VCs alongside KPCB and Andreessen Horowitz with 20 deals.
Late-stage deal share stays strong in Q3…
After Q2’14 saw late-stage deal share (Series D+) hit a five-quarter high at 17%, Q3’14 saw late-stage activity stay strong at 16%. Early-stage deal activity (Seed/Series A) remained range-bound at 55%.
…But late-stage funding share declines
Series B funding share rose to take 1/4th of all VC funding in Q3’14. Late-stage funding share fell for the second consecutive quarter in Q3 to 39%, after taking nearly half of all VC funding in Q1 and Q2, respectively.
New York nearly doubles Massachusetts in VC deals
After topping VC deal share by just a percentage point in Q2’14, NY took 14% of overall VC deals in Q3 nearly doubling Mass.-based VC deals in the quarter. NY VC funding totals doubled Mass behind a number of sizable deals to IEX, Vice and Fanduel among others.
Mobile VC funding tops $1B, but falls from Q2 high
While deal pace remained high, VC funding to the mobile & telecom sector fell 54% on a quarterly basis after Q2 saw a plethora of huge deals including Uber, Lyft and Instacart. 4 of the 5 past quarters have seen over $1B in VC deployed to the mobile sector. Health and wellness topped mobile deal volume in Q3, taking 10% of all share. Interestingly, social mobile deals including Secret and Hinge took second at 7% share.
Green tech VC funding falls back
Green Tech startups cooled down to a four-quarter low of funding dollars and a five-quarter low of deals. Funding and deals fell 50% and 37% respectively compared to the previous quarter, which saw multi-quarter highs in both metrics.
It’s easier to raise money at a $1B valuation than IPO at one
21 tech companies have raised a first financing at a $1B valuation in 2014, while just 7 have gone public for more than a $1B.Among the new entrants in Q3’14 were Qualtrics and Credit Karma.
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Note: We tracked a number of mega-deals this quarter whose investors included hedge funds or mutual funds for example. This report only includes only rounds in which VCs participated so that we can accurately reflect (and not inflate) VC investments.