Q3 Venture Funding Trends
PeHub has a great list today summarizing the companies who raised the most venture funding during Q3.
The full list and a comprehensive explanation of the trends after the jump. But in summary:
1. Over 70% of the companies are in California.
2. Nearly half are in health care
3. Very few of the companies are pure technology
4. Green-tech still hot
5. Big Deals are back!
1. Over 70% of the companies are in California.
Despite claims over the last year, that the venture hub of the country is moving to Boston, New York, or even Austin – venture activity is still predominately located in the Bay Area. Anyone who has experienced the environment in California will know why – people live technology and innovation there. Every night offers activities that enabled entrepreneurs and innovators to get together with each other and develop ideas.
Coming out of North Florida – which heralds itself as one of the new hubs of innovation – gives me a great perspective on the true value of living in the Bay Area. Here there is one event a month for entrepreneurs to get together with each other. There are four venture funds in all of Florida. Very few start-ups here are truly led by entrepreneurs who have started companies before. These obstacles are nearly impossible to overcome and the reason I strongly believe California will remain the hub of innovation in the US at least in the near term.
2. Nearly half are in health care
On a primary level this showcases how truly recession proof the health care and medical device industry is. This claim is even more solidified when you compare it to investment banking data over the last two years – where the only companies doing M&A deals were in the pharma or medical device space.
At the same point, it also demonstrates how costs for development of new products in the health care space have not come down – especially when compared to the technology industry. Across every silo in technology – starting in software and moving today into hardware – the costs of launching a new idea have come down dramatically.
Built on a similar platform, one would hypothesize that health care costs would have dropped similarly. Based solely on this list and the amount of funding still being received – this would not seem to have yet occurred. Before jumping on me for making outrageous assumptions – I’m going to research more into this and most likely turn this whole concept into a future blog post.
3. Very few of the companies are pure technology
Outside of Twitter and Facebook – very few of the companies on the list are pure technology plays – software, web, hardware or otherwise. This compliments the idea that the cost of developing technology companies has declined significantly with innovations in freeware and as a service offerings.
As an aside, if I was to make an argument that Twitter or Facebook was overvalued* – this is the data I would first point to. This is especially true for Twitter who is floating a billion dollar valuation with the most recent hundred million dollar valuation. The question is how much of this is hot money and how much is truly purchasing value?
* I think Facebook is fairly valued. Twitter is a whole other story.
4. Green-tech still hot
With lower energy costs and a flight to safety in investment dollars – clean-tech looked to be in trouble at the start of 2008. However, the IPO of A123 Battery Systems and similar deals in the pipeline seem to have kept investors in the space. If the price of A123 stays strong – expect many more IPOs to happen in the next few weeks and a lot more venture money to flow into the space.
5. Big Deals are back!
Across the technology banking space, the last two weeks have been exceptionally hot. Starting with Intuit’s acquisition of Mint.com – deals happened on a daily basis as the big companies who held tons of cash on their books through the recession started to take advantage of down valuations and VCs who needed to get exits. As the deals continue, VCs should tend to loosen the purse strings even more – willing to go after big name, high profile deals (See: Twitter!)
The full list is below. The next few days should see some posts about some of the more obscure companies on the list – RuffaloCODY – a company based in Iowa that sells software for fund raising seems ripe for a profile. Any other trends jump out at anyone else?
Third Quarter’s Top Venture Deals (From PeHUB)
1. Solyndra (photovoltaics for solar energy panels), five rounds, $285.9 million
2a. Twitter (microblog), 7 rounds, $100 million
2b. WastePro USA (waste disposal and recycling), later stage, $100 million
2c. Facebook (social network), corporate stage, $100 million
3. Tesla Motors (electric cars), 6 or 7 rounds, $82.5 million
4. Pacific Biosciences (gene sequencing), 6 rounds, $67.9 million
5. Canopy Financial (technology to lower costs for corporate healthcare benefits), 3 rounds, $62.5 million
6. Serious Materials (ecofriendly building materials), 3 rounds, $60 million
7. Meru Networks (wireless infrastructure for businesses), 9 rounds, $57.5 million
8. Kosmos Energy (oil and gas exploration in Africa), 14 rounds, $56.5 million
9a. Calypso Medical, (radiation therapy), 6 rounds, $55 million
9b. RuffaloCODY, (fundraising and enrollment management services), 4 rounds $55 million
10. Complete Genomics (gene sequencing and drug development), 4 rounds, $45 million
11. Oraya Therapeutics (robotically controlled treatments for inflammatory eye disease), 3 rounds, $42 million
12a. Direct Flow Medical (aortic tissue valve prosthesis for people with heart disease), 3 rounds, $40 million
12b. Adamas Pharmaceuticals (small molecule drugs for infectious diseases, including influenza A), 3 rounds, $40 million
13. Epizyme, (drugs to treat diseases based on gene functions and mutations, i.e. epigenetics), 2 rounds, $32 million
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