Venture Capital Investment Activity in the Internet Sector, 2007 – 2015 YTD

by Emily Forbes

  • 21 May 2015
  • PE
  • VC

The internet sector is the most prominent venture capital-backed industry in terms of the number of deals worldwide, and in terms of aggregate value of investments comes second only to healthcare in the US and Europe. Preqin’s Venture Deals Analyst shows that there have been 13,506 global venture capital financings in the internet sector since 2007, with an aggregate value of $105bn. The US, with 7,435 such financings valued at an aggregate $50bn, represents 55% of all internet venture capital deals in terms of number of deals, far ahead of Europe (21%) and Rest of World (24%). However, the data suggests that the geographic trends in the internet sector have shifted over recent years, with the traditional hub of the US playing a smaller part in venture capital deal activity, and Rest of World playing a larger role.

Shift in Global Trends

Although the US represents the majority of venture capital deals in the internet sector from 2007 to 2015 YTD, the proportion that US deals account for in terms of number of deals globally has been decreasing year-on-year from 65% in 2009 to 40% in 2015 YTD, as shown in the chart below. The aggregate value of internet deals in the US follows a similar trend, representing 74% of the global total in 2009, decreasing each year to 2012 and currently standing at 31% for 2015 YTD. Equally, European internet deals are going the same way. The proportion of the number of European deals has decreased from 23% in 2008 to 16% in 2015 YTD, with aggregate value fluctuating between only 15% and 9% over the last few years.

*Figure excludes add-ons, mergers, grants, venture debt & secondary stock purchases.

The number and aggregate value of venture capital deals in the internet sector in the Rest of World region has been growing rapidly year-on-year since 2009 and can largely explain the proportional declines in the US and Europe. There has been notable growth in parts of the Asian internet sector with the emergence of the Indian and Chinese markets, highlighted last year, for example, with India-based e-commerce company Flipkart receiving $1bn through a Series G financing round, helping the Rest of World region to further eat into the traditional dominance of the US and Europe. Furthermore, Preqin data shows that recently (Q4 2014, Q1 2015 and Q2 2015 TD), and for the first time since 2007, the quarterly number of venture capital investments in the internet sector in the Rest of World region surpassed the number of such investments in the US.

Preqin data shows a clear trend of decreasing dominance of the US and Europe with regards to investments in the internet sector. Despite this proportional decrease, the US and Europe together still account for the majority (57%) of venture capital activity in the sector in 2015 YTD. The US and European markets, networks, resources and talent pools will likely remain ahead of Rest of World in this sector; but as the data shows, the gap is quickly narrowing.

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