Q2 Venture Capital Activity

Venture capital funding activity continues to be very strong in the second quarter of 2015, according to a report from the National Venture Capital Association.  (NVCA Report)  $17.5 billion was invested in 1,189 fundings in the second quarter, the largest amount of money since 2000.  It was also a 30% increase in dollars invested from the first quarter of 2015.  A large chunk of the financings were in the software sector, but biotech, medical device and health care also saw strong support with $3.1 billion in total life sciences funding in the second quarter, up 41% from the prior quarter.  While small in total dollars, the important category of seed financing rose 85% in dollars, while early stage investment was up 58% to $5.8 billion.  This reflects greater investor comfort investing in riskier companies.  Expansion stage attracted the largest pool of dollars, $7.3 billion.

Exit activity was also good for the quarter.  There were a total of 27 venture-backed companies executing initial public offerings in Q2, raising $3.4 billion in those offerings.  Life sciences companies represented over two-thirds of those IPOs.  While a significant increase from Q1’s IPO activity, the number of deals was down slightly from second quarter 2014 and about a third less proceeds were raised.  Average IPO size has declined, reflecting earlier-stage companies being brought public, which likely is a sign of a top in IPO activity and potentially the overall market.  There were 70 merger and acquisition transactions in the quarter involving venture-funded firms, down from 94 in the first quarter and down from 119 in the second quarter of 2014.  Only 14 of these transactions had values announced and the total of those was over $4 billion.  Nine of these were health care transactions, 7 of which had an announced value, totaling $1.4 billion.  The venture sector appears healthy, but also showing signs of extension.