global vc fund report

Global venture capital investment activity saw slight decreases in the third quarter. Deal flow dropped

4%, from 1,380 to 1,323, while investment dipped 3% to garner $11 billion. Compared to the same peri-

od in 2012, investment raised 2% but deal flow was still lower. In 2013 so far, 3985 transactions have

been completed raising $33 billion, a 6% decrease on both figures posted for the equivalent 2012 period.

U.S. remained the most active region, with a 2% increase in investment: $8.1 billion from 806 venture

capital deals. Europe faced the sharpest investment decline (31%), while investment into Chinese and

Israeli venture-backed companies registered a 59% and 21% investment rise, respectively.

From an industry perspective, Information Technology (IT) received the largest allocation of investment,

accumulating $3 billion. Business and Financial Services followed in second position with $2.8 billion, up

42% from 2Q’13. Healthcare and Consumer Services both shared third position, down 20% and 10%

respectively, from the previous quarter.

Companies within the energy and utilities remained flat, raising $400 million. This is a 3% uptick from

2Q’13 and 51% jump from 3Q’12.

Median VC round size decreased globally.

GLOBAL OVERVIEW: 3Q’13 Key Trends

3Q 2013 VC Edge

Inside this issue:

Global

Overview

1-3

U.S. Overview 4-5

Israel

Overview

6-7

Europe

Overview

8-9

China

Overview

10-11

Global VC Deal Flow and Investment in Decline in 3Q’13

Deal Flow & Equity into Canadian, Chinese, European, Indian, Israeli* & U.S. Venture-Backed Companies

*Israel HQ only

Welcome to VC Edge, a venture capital industry quarterly update prepared exclusively for participants

in Dow Jones VentureSource Research efforts. The VC Edge offers a view on trends currently affecting

the market. VentureSource relies on its ongoing relationships with entrepreneurial companies, inves-

tors, and service providers to deliver the most current data, research tools, and information on ven-

ture-backed companies. We appreciate your help in making us the premiere provider of research and

analysis in the private markets industry.

VC Edge

IT Saw Largest Investment Allocation in 3Q’13

Equity Investment by Selected Industry Groups into Venture-Backed Companies

*Other: Consumer Goods and Industrial Goods & Materials

U.S. Dominates Global Investment Allocation in 3Q’13 Equity Investment by Selected Regions into Venture-Backed Companies

Powered by Dow Jones VentureSource

Largest Deals per Industry Segment in 3Q’13 ($M USD)

Beats Electronics LLC U.S. Electronics and Computer Hardware $500

Uber Technologies Inc. U.S. Travel and Leisure $361

Palantir Technologies Inc. U.S. Software $197

MongoDB Inc. U.S. Business Support Services $150

Oyster Petroleum Ltd. UK Non-Renewable Energy $150

3Bear Energy LLC U.S. Non-Renewable Energy $127

Shanghai 2345 Network Technology Co. Ltd. China Consumer Information Services $124

Evolent Health Inc. U.S. Healthcare Services $100

Anaqua Inc. U.S. Software $100

Telogis Inc. U.S. Business Support Services $93

3Q’13 Most Active Investors by Region

U.S. Israel Europe China

Google Ventures Pitango Venture Capital High-Tech Gruenderfonds

Management GmbH IDG Capital Partners

Sequoia Capital Lool Ventures Seed Capital Management I/S Shenzhen Capital Group Co.

Ltd.

Andreessen Horowitz Wadi Ventures Bpifrance Investment GGV Capital

Kleiner Perkins Caufield & Byers Globespan Capital Partners Index Ventures Morningside Group (Holdings)

Ltd.

New Enterprise Associates Infinity Group Enterprise Ireland Shanghai Zhonglu Group Co.

Equity Investment by Round Class into Chinese, European, Israeli, and U.S. Venture-Backed Companies in 3Q’13

VC Edge

Venture capital investment was at its highest since 2Q’12 when 981 deals garnered $9 billion.

U.S.-based companies raised $8.1 billion from 806 venture capital deals in 3Q 2013, a 2% increase in capital and a

4% decrease in deal count from the previous quarter. Compared to the same period in 2012, a 10% decrease was

registered in number of deals, while amount raised rose 4%.

Business and Financial Services (46%) and Consumer Services (1%) were the only two sectors to register quarter-

over-quarter increases in capital.

IT saw the largest investment allocation, with 246 deals garnering $2.3 billion and accounting for 28% of total equity

investment. However, the sector reported a drop in amount invested both quarter-over-quarter (2%) and year-

over-year (3%). Business and Financial Services registered the highest quarter-over-quarter amount increase (46%),

accumulating $2.2 billion through 195 deals.

Healthcare placed third with $1.8 billion in 164 deals. The sector reported a 12% drop in investment and a 7% de-

crease in number of deals.

$1.3 billion was raised by Consumer Services companies through 148 deals, a 10% decline in deal flow, while invest-

ed capital inched up just 1%.

Later round investments attracted the majority of VC dollars: $4.5 billion into 254 deals.

From a regional point of view, the Bay Area maintained lead and venture capital invested rose 7% compared to last

quarter: $3.2 billion versus $3 billion. Deal flow dipped 3%, at 269 transactions.

Median round size decreased 16% from 2Q’13 but increased 4% from the same period last year.

U.S. OVERVIEW

U.S. Investment On the Rise in 3Q’13 Deal Flow and Equity into U.S. Venture-Backed Companies


Bay Area Draws Most Investment Dollars in 3Q’13

Regional Investment in the U.S.

IT Dominates 3Q’13 Equity Investment by Selected Industry Groups into U.S. Venture-Backed Companies


VC Edge

Venture-backed Israeli companies secured $307 million in the third quarter of 2013, a 50% fall in amount raised

when compared to 2Q’13, when $619 million was raised. Deal flow also dropped 10% with 37 closed deals, from

41 in 2Q’13. Comparing third quarter figures to those posted during the same period last year, 3Q’13 capital in-

vested rose 3% and deal count registered a 5% decrease.

IT remained the strongest sector for venture capital in Israel. Venture capitalists put $104 million into 16 deals.

Nonetheless, capital injection into the IT sector dropped 80% from 2Q’13. The strongest segment was software:

$87 million that accounted for 28% of total VC dollars.

The industry goods and materials sector placed second with the company Kaiima Agro-biotech Ltd., in the Agricul-

ture and Forestry segment, raising $65 million in its fourth round.

Companies in the business and financial services sector garnered $56 million, a 29% fall from the previous quarter.

Deal flow also experienced a decline: just eight deals closed, almost half of the respective 2Q’13 figure. Taking

16% of overall investment, healthcare attracted $50 million, up 286% from the $13 million invested the quarter

before. Energy and utilities and consumer goods did not complete any transaction.

Later stage rounds took the lion’s share of capital invested (59% with $171 million), a 62% drop from the previous

quarter. First rounds came second and totaled 27% with $78 million.

Median round size (Israeli-HQ only) decreased both quarter-over-quarter (12%) and year-over-year (33%).

Israeli Investment Fell in 3Q’13 Deal Flow and Equity into Israeli Venture-Backed Companies

ISRAEL OVERVIEW


IT Gets Lion’s Share in Amount Invested During 3Q’13 Equity Investment by Selected Industry Groups into Israeli Venture-Backed Companies


Later Stage Companies Dominate in 3Q’13 Equity Investment by Round Class into Israeli Venture-Backed Companies

VC Edge

Negative Quarter-over-Quarter Decrease for European Companies Deal Flow and Equity into European Venture-Backed Companies

Venture capital investment into European companies experienced a quarter-over-quarter decline. European com-

panies raised €1.13 billion via 319 deals during 3Q’13, a 12% fall in activity and a 32% decline in capital raised versus

last quarter. In contrast with 3Q‘12, deal flow experienced a 7% uptick, while investment dipped 1%.

The business and financial services sector received the largest allocation of investment (26%), accumulating €294

million through 81 deals, an increase of 33% from 2Q’13 in investment and 7% in number of deals. Healthcare held

on to second position in terms of equity financing, taking a 21% share of all 3Q’13 investment. The sector raised

€243 million across 39 deals, falling 44% and 46% from respective 2Q’13 figures. The consumer services sector

occupies third position, with companies gathering a 20% share of the total amount invested during the quarter. This

sector received €228 million across 101 deals, an uptick of 3% in deal flow but a drop of 45% in capital raised from

2Q’13. The IT sector saw its share of investment fall from 28% in 2Q’13 to 12% in 3Q’13. Companies in this seg-

ment completed 65 deals for a total of €131 million, an 11% decline in deal flow and 72% decline in capital from last

quarter.

The U.K. reclaimed its position as the favoured destination for equity financing during 3Q’13 with a 48% share of all

investment into European VC-backed companies. The country received €545 million across 94 deals, up 147% and

21% from respective 2Q’13 figures. France rose one place to second, despite capital and deal flow dipping by 11%

and 29% respectively from the previous quarter. The country received €183 million through 51 deals, representing

a 16% share of all 3Q’13 investment. Germany dropped to third raising €135 million, a 12% share of investment.

This represents the lowest quarterly amount for the country since 3Q’11.

Median round size fell 21% and 5%, compared to 2Q’13 and 3Q’12 respectively.

EUROPE OVERVIEW

Deal Flow Continue to Decline in 4Q’12 Deal Flow and Equity into Mainland Chinese Venture-Backed Companies


UK Takes Majority of European Investment 3Q’13 Capital Raised in Europe by Country

Business and Financial Services Leads 3Q’13 Investment Allocation Equity Investment by Selected Industry Groups into European Venture-Backed Companies


VC Edge

Venture Capital Investment Increases in 3Q’13 Deal Flow and Equity into Mainland Chinese Venture-Backed Companies

Investment into Chinese venture-backed companies improved in 3Q’13, as companies raised $765 million from 77

deals. The gains mark a 59% increase in capital and a 28% rise in deal activity from the previous quarter.

Compared to 3Q’12, deal flow improved by 45% but investment declined by 16%.

So far in 2013, Chinese venture-backed companies have raised a total of $1.74 billion through 175 deals, down 48%

in capital and down 5% in deal activity when compared to the first nine months of 2012.

Consumer services, one of three sectors to see gains in dollars from last quarter, placed first in terms of invest-

ment received. This sector raised $421 million via 25 deals during 3Q’13, up 131% and 9% from respective figures

for the previous quarter, equating to a total investment share of 55%.

The information technology group raised the second highest proportion of investment for 3Q’13. IT companies

drew in $278 million across 35 deals, representing a 36% investment share for the quarter and a significant 213%

and 75% increase in capital raised and deals, respectively, compared to last quarter.

Business and financial services companies received $35 million through 10 deals during 3Q’13, an uptick of 9% and

67% in dollars raised and deals completed from 2Q’13 figures. The sector’s investment figure represents a 5% share

of total equity investment into Chinese VC-backed companies for the period.

Receiving a 3% investment share, the healthcare sector posted $23 million across four deals, dropping significantly

from the $158 million accumulated in seven deals during 2Q’13. Companies in the energy and utilities sector failed

to attract any investment for the fourth consecutive period.

Median round size dropped 6% quarter-over-quarter and 45% year-over-year.

CHINA OVERVIEW

Deal Flow Continue to Decline in 4Q’12 Deal Flow and Equity into Mainland Chinese Venture-Backed Companies


Consumer Services Gains First Position in 3Q’13 Equity Investment by Selected Industry Groups into Mainland Chinese Venture-Backed Companies


Companies Generating Revenue Dominate in 3Q’13 Equity Investment by Development Stage into Mainland Chinese Venture-Backed Companies

About Dow Jones VentureSource

Dow Jones VentureSource is a data source in DJX, Dow Jones’ flagship news and analytics

platform. VentureSource helps venture capitalists, corporate development executives, investment

bankers and service providers find deal and partnership opportunities, perform comprehensive due

diligence and examine trends in venture capital investment, fund-raising and liquidity. It provides

accurate, comprehensive data on venture-backed companies – including their investors and execu-

tives – in every region, industry and stage of development throughout the world.

The investment figures included in this release are based on aggregate findings of Dow

Jones' proprietary research and are contained in VentureSource. This data was collected by survey-

ing professional firms, interviews with company executives, and from secondary sources. These ven-

ture capital statistics are for equity investments into early stage, innovative companies and do not

include companies receiving funding solely from corporate, individual, and/or government investors.

Figures contained throughout the report current at time of editorial but subject to change without

notice. No statement herein is to be construed as a recommendation to buy or sell securities or to

provide investment advice.

Research: Victoria Bradley, Micaella Cabral, Jonathan Cohen, Sean Curran, Chrystle De Leon, Matt Farguson, Dani Feng,

Matthew Fleming, Lisa Fong, Ivy Guo, Angelo Iacovella, Brendan Hughes, Karen Liu, Anne Malterre, Cyril Neant, Cynthia

Nonnenmacher, Toivo Rehemets, Larissa Runkle, Johanna Saenz, Adrianne Saltzmann, Ai Sato, Sarah Scritchfield, Monica

Sherwood, Rodnie Tauro, Daniel Wang, Ruoying Wang, Yimeng Wang, Aggie Wong, Yulia Xian, Irene Yao, Jessica Yao, Coco

Zhu, Jiayao Zhu, Julia Zhu, Skyey Zhu

Editorial: Sarah D’Intino | Acknowledgements: Nina Kuzmina, Lucia Lopez, Patricia Ortiz, Corinna Raschick, Laura Sala-

zar, Atsuko Shinoda, Christine Thygesen, Felix Xue

Research Contact: Valerie Foo, [email protected]

Media Contact: Erin Carpenter, [email protected]

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