Venture Capital Financing Drops 30% in Q3 2014 (Quarterly Report)

OCTOBER 12, 2014Venture Capital Financing Drops 30% in Q3 2014 (Quarterly Report)

Let's ease up on the bubble talk shall we? Funding drops 30% vs prior quarter 

and deal activity sequentially declines as well.

After Q2’14 saw venture capital investment hit its highest quarterly mark since 

Q1’01,there was no such step-up in Q3’14 as funding dropped 30%, while deal 

levels fell 10%. Still, the first three quarters of 2014 saw U.S. VC funding leap to 

$33.75B, which represents an eye-popping increase of 59% compared to the first

nine months of last year. The absence of an Uber-like deal served to lower the 

funding tally in Q3.

On the exit front, the IPO market for VC-backed companies fell off significantly

 in Q3. Just 18 U.S.-based VC-backed companies went public in Q3, compared to 

35 in Q1 and 24 in Q2. The much anticipated Alibaba IPO may have inhibited some

IPO activity in Q3 so it will be interesting to see if VC-backed IPOs get their mojo 

back in Q4.

To download the entire 114 page Q3 2014 Venture Capital Activity and 

Exit Report, loginhere. 

(Note: The report is only available to paid CB Insights subscribers.)

VC-backed IPO pace slumps in Q3

The IPO market for VC-backed companies fell off significantly in Q3. 18 U.S.-based

 VC-backed companies went public in Q3, compared to 35 in Q1 and 24 in Q2. 

Meanwhile, just one US-based tech company, TubeMogul, went public in Q3 as 

the healthcare sector took a whopping 83% of all quarterly VC-backed IPO activity.

 Call it the Alibaba chokepoint?

Prior to break-up, Atlas Venture gets busy

NEA led VC investors by U.S. deals in Q3 2014 including Jet.com, DataRobot and

 Branch Metrics among others. Atlas Venture, which is splitting its life sciences 

and tech arms, ranked in the top 3 most active VCs alongside KPCB and 

Andreessen Horowitz with 20 deals.

Late-stage deal share stays strong in Q3…

After Q2’14 saw late-stage deal share (Series D+) hit a five-quarter high at 17%, 

Q3’14 saw late-stage activity stay strong at 16%. Early-stage deal activity 

(Seed/Series A) remained range-bound at 55%.

…But late-stage funding share declines

Series B funding share rose to take 1/4th of all VC funding in Q3’14. Late-stage

 funding share fell for the second consecutive quarter in Q3 to 39%, after taking 

nearly half of all VC funding in Q1 and Q2, respectively.

New York nearly doubles Massachusetts in VC deals

After topping VC deal share by just a percentage point in Q2’14, NY took 14% of

 overall VC deals in Q3 nearly doubling Mass.-based VC deals in the quarter. 

NY VC funding totals doubled Mass behind a number of sizable deals to IEX, 

Vice and Fanduel among others.

Mobile VC funding tops $1B, but falls from Q2 high

While deal pace remained high, VC funding to the mobile & telecom sector 

fell 54% on a quarterly basis after Q2 saw a plethora of huge deals including Uber,

 Lyft and Instacart. 4 of the 5 past quarters have seen over $1B in VC deployed 

to the mobile sector. Health and wellness topped mobile deal volume in Q3, 

taking 10% of all share. Interestingly, social mobile deals including Secret and

 Hinge took second at 7% share.

Green tech VC funding falls back

Green Tech startups cooled down to a four-quarter low of funding dollars and a

 five-quarter low of deals. Funding and deals fell 50% and 37% respectively 

compared to the previous quarter, which saw multi-quarter highs in both metrics.

It’s easier to raise money at a $1B valuation than IPO at one

21 tech companies have raised a first financing at a $1B valuation in 2014, while

 just 7 have gone public for more than a $1B.Among the new entrants in Q3’14 

were Qualtrics and Credit Karma.

Note: We tracked a number of mega-deals this quarter whose investors included

 hedge funds or mutual funds for example.  This report only includes only rounds

 in which VCs participated so that we can accurately reflect (and not inflate) 

VC investments.