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Venture Capital Financings within the Software Industry, 2007 – 2014 YTD (as at 26.03.14)

by Gemma Morris

  • 27 Mar 2014
  • PE
  • VC

With 267 deals so far this year within the software sector according to Preqin’s Venture Deals Analyst, at an aggregate value of $2.4bn, the industry continues to be a prominent sector in the venture capital deal space.  Despite a 22% drop in deal flow when comparing software financings this year to the same point in 2013, the aggregate value has seen a 45% rise. 

Five such deals this year have already exceeded the $100mn mark, the largest of which being Silicon Valley-based Cloudera’s $160mn series F funding, giving the company a post-money valuation of $1.8bn. 

Between 2007 and 2013, 2013 was a record year for venture capital activity in the software industry in terms of the volume and value of deals, with over 1,400 financings reaching an aggregate of nearly $10bn; 10 deals throughout the year reached values of $100mn or more, including the $1.53bn financing of venture capital-backed Supercell in October and AirWatch’s $200mn series A funding from Insight Venture Partners in February. As we approach the end of Q1 2014, venture capital activity in the software industry in the year so far looks promising when considering the higher value of deals than at the same stage in the previous record year. 

When looking at the industry with a regional focus, given the large proportion of software financings raised by Silicon Valley-based companies, it is no surprise that North America dominates venture capital activity in this sector. Preqin’s Venture Deals Analyst online service shows that 2010 proved to be the most prolific year for the region, accounting for three quarters of deal volume and 85% of aggregate value of all venture capital financings in the software industry in 2010. 

Interestingly, between 2007 and 2013, financings in software companies in Greater China have only ever accounted for 5% or less of both the number and value of deals, but so far this year the proportion of the value of such deals contributes to 12% of global value, at $277mn, the next highest proportion after North America. The value has already surpassed the figure for the whole of 2013 within the region, when the value reached $221mn. With large financings such as the series B rounds for Beijing-based companies Wandoujia ($120mn), and DianDian ($74mn), it seems that the software sector is becoming a more popular area of investment in Greater China as start-ups in the Far East country continue to expand and search for larger rounds of funding, finding success in spite of the moratorium on IPOs in the country which seemed to be a real deterrent to investors last year. 

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