VC Investment Soars And Valuations Spike In Q2
Venture capital investing in startups spiked in the second quarter of 2014 as frenzied investors sought to buy into the hottest deals. VC investing hit its highest level since the first quarter of 2001, according to Dow Jones VentureSource.
Investors poured $13.8 billion into 917 deals in Q2, up 21% in dollars from the prior quarter and up 4% by number of deals. The amount investment increased 60.2% from the year-ago quarter, although number of deals dropped by 2.2%. Consumer startups and business and financial startups were the big winners in the quarter.
Showing the high demand for startups, median pre-money valuations jumped to $58.3 million, more than double the $28.4 million in the prior quarter and $24.2 million in the year-ago quarter. Is that just the function of several massive deals like Uber and Airbnb? We shall see in coming quarters.
The largest VC investments in the second quarter were Uber ($1.2 billion), Airbnb ($450 million), Pure Storage ($225 million), Pinterest ($200 million) and Automattic ($160 million).
Meanwhile, fundraising by U.S. venture capital funds in the second quarter of 2014 dropped from the prior quarter.
M&A and IPOs
Mergers and acquisitions of venture-backed companies slowed slightly, dropping 26% by dollars from the hot first quarter of 2014. Data showed 108 deals totaling $12.6 billion, which is down 16% and 26%, respectively from 128 deals worth $17 billion in the first quarter of 2014. As usual, the numbers are slightly different from NVCA’s numbers (NVCA showed 97 deals compared to Dow Jones’ 108), but they are directionally the same.
The largest deals of the quarter were Oculus VR, which was acquired by Facebook for $2 billion, Ability Network, which was acquired by Summit Partners for $550 million, and Maker Studios, which was acquired by Disney for $500 million.
IPOs showed 25 VC-backed companies raising $2.2 billion in the second quarter of 2014. That’s down 34% by number of deals and 26% by dollars from the hot first quarter of 2014. But it’s still an increase from the year-ago period.