VC-backed M&A Takes A Pause While Late Stage Investing Stays Hot

By on January 15, 2015

Screen Shot 2015-01-14 at 1.36.51 PMVenture-backed M&A deal flow took a breather in the fourth quarter of 2014. At the same time, dollars invested into startups and funds raised by VC firms continued to increase in the quarter, according to data from Dow Jones VentureSource.

VC-backed M&A deal flow cooled in Q4 2014, with 102 deals, a 23% drop from the previous quarter. By dollars, companies sold for $32 billion in total, which was up 60% from the prior quarter. That figure however, was skewed somewhat by the closing of Facebook’s $19 billion WhatsApp deal.

Meanwhile, the number of VC investments into U.S. startups dropped after a scorching earlier part of the year, particularly seed deals, though dollars invested increased. VCs invested $13.8 billion in 814 deals in U.S. companies in Q4 2014. That’s up 24% in dollars despite a drop in 12% in number of deals from the prior quarter.

The number of seed deals dropped 40% from the prior quarter, and dropped 56% from the year-ago period. First round and second round deals also dropped. Only later stage deals stayed roughly the same as the prior quarter. Median deal size increased to $6.8 million in Q4 2014, from $5.0 million in the prior quarter and $4.18 million in the year-ago quarter.

The most active investors for U.S.-based companies were: New Enterprise Associates, Khosla Ventures, Andreessen Horowitz, Kleiner Perkins Caufield & Byers and Sequoia Capital.

Meanwhile, U.S. venture capital firms continued to raise capital for new funds. In the fourth quarter of 2014, 85 VC funds raised $8.1 billion, up 25% in dollars raised and up 4% in number of funds from the prior quarter. Overall, VC funds raised close to $33 billion in 332 funds in 2014, up 62% from 2013 by dollars and up 27% by number of funds.

Median pre-money valuations also continued to stay hot, increasing to $45.6 million in Q4 2014, from $35.0 million in the prior quarter and $21.63 million in the year-ago quarter.

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