Turns out things are looking good for fledgling startups on the lookout for substantial funding, according to the MoneyTree™ Report, a quarterly study of venture capital investment activity in the U.S. Not only did dollars invested by VCs increase by 12 percent in Q3, but the money invested in software companies exceeded $3 billion for the first time in 12 years.
Investment activity also rose five percent in the number of deals compared to Q2 of 2013 when $7 billion was invested in 956 deals. Even when you take a look at the data from the first three quarters of 2012, it's clear that there's an upward trend of dollar and deal totals.
“It’s an exciting time to be an entrepreneur with a software company,” said Mark McCaffrey, global technology partner and software leader at PwC US, in a press release. "The continued increase in valuations for innovative and disruptive technologies in software-related companies, coupled with the increase in exit activity, is driving venture capitalists to make more investments in this space. And, at the current pace of investing, we should see total venture capital investments in 2013 exceed the annual total from 2012.”
Of course McCaffrey's referring to the software industry's impressive amount of deals in Q3: 420. That's a 23 percent increase from from the 342 rounds completed in Q2 of 2013. Then there's also the fact that nine of the 11 biggest investments during Q3 went directly to software companies.
Not too shabby, not too shabby at all.
John Taylor, head of research at the National Venture Capital Association, also spoke to the great promise that lies ahead for young companies. He said that "with more than half of this quarter’s deals coming from early and seed stage deals, there’s credible reason to be optimistic about the future of innovation and the vibrancy of the startup ecosystem."
Here are some other interesting stats worth checking out from the full report published Friday:
- The biotechnology industry followed software as the second largest sector for dollars invested. Just about $852 million went into 123 deals, down 39 percent in dollars, but up 10 percent in deals from Q2
- The medical device industry remained competitive in Q3 as well, receiving the third largest investment with $566 million going into 65 deals, up 12 percent in dollars, but down 8 percent in deals
- When it came to Internet companies, VCs were weren't as willing to commit, investing $1.5 billion into 252 Internet-specific ventures during Q3. That investment level is 19 percent lower in dollars and 9 percent lower in deals than Q2. It's also worth noting that only one of the largest 11 rounds for the quarter was in the Internet-specific sector
- Q3 marked the seventh consecutive quarter of decreasing investment levels in the clean technology sector. It declined 20 percent in dollars and seven percent in deals. Only $297 million went into 40 deals total.
