Late Stage Deal Activity Boosts US Venture Capital Financings – August 2014

by Joel Coulson

  • 07 Aug 2014
  • PE
  • VC

In H1 2014, US-based companies received 2,013 venture capital financings at an aggregate value of $25.8bn. Preqin’s Venture Deals Analyst online service shows that value surpassed that seen in the whole of 2009, a year when tough market conditions hampered investment levels. However, if H2 continues in the same vein as H1, 2014 would end with an aggregate value of $51.5bn, $13.1bn higher than the $38.5bn peak seen in 2011. Nonetheless, even if H2 isn’t as strong as H1, the 2014 aggregate value still has strong potential to surpass each full year prior. 

Deeper analysis of the aggregate value for US venture capital financings in H1 2014 and historical comparisons show that this period has the third highest number of deals in comparison to all January-June periods between 2007 and 2014. However, H1 2014 US venture capital financings give an average deal value of $15mn, which is 25% larger than the previous highest value. A possible route of explanation could be an increase in later stage deals as these rounds inherently carry a larger deal value. 

Carrying this notion forward, early stage deals (angel, seed, Series A, and Series B) account for 1,072 deals at an aggregate value of $7.5bn for H1 2014, while late stage deals (Series C onwards and pre-IPO) account for just 242 deals but with an aggregate of $10.9bn. The substantially higher deal value therefore suggests that late stage deals could be the reason for such an uptick in the aggregate value for all US venture capital financings in H1 2014. However, when comparing the number of late stage deals in H1 periods, 2014 is the second lowest between 2007 and 2014 despite its aggregate deal value, $10.9bn, dwarfing any H1 prior and being a significant 45% larger than the second highest H1 ($7.5bn in 2011). 

These figures show that late stage deals are certainly the more dominant stages of H1 2014’s US venture capital financing make-up in terms of value. It is interesting to note that while the amount of venture capital committed to more mature US companies has been on the increase, the number of IPO exits has also been rapidly increasing in each H1 since 2011. Fifty-five IPOs were witnessed in H1 2014, 62% more than the previous H1. Since H1 2011, late stage aggregate value in the first six months of each year has averaged $7.2bn, compared to an average of $5.2bn from H1 2007 to H1 2010. During this same period, IPOs have become more prominent; these upwards trends run parallel to each other and can be linked, as late stage deals are often used as pre-exit capital.

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