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How Health Care is Leading New Venture Capital Investment

Venture capital investment in the second quarter climbed to record levels, with technology and health care making the largest gains.
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The floodgates of financing are officially open for some of the luckiest tech and health-care companies, according to a new report.

Venture capital investment climbed to a level not seen since 2001 in the second quarter, according to private company research firm CB Insights, whose "Financing and Exit Trends" report for the second quarter of 2014 was released on Thursday.

Investment dollars from venture capital firms jumped nearly 40 percent in the second quarter to $13.8 billion, and the number of deals increased 11 percent compared to the first quarter. Venture capital funding increased 71 percent to $24 billion for the first half of 2014, compared to the same period a year earlier. By number of deals, there were 1,854 for the first six months of 2014, compared to 1,648 for the same time period in 2013.

Technology and health care companies reaped most of the benefit, however. For the first half of 2014, the number of technology companies that received first-time financing in excess of $1 billion more than doubled to 14, according the report. (On its own, ride-sharing company Uber reeled in $1.2 billion in the quarter, pushing its valuation to more than $18 billion, a record for a startup.)

Internet companies received 45 percent of all venture capital funding for the quarter, down three percentage points compared to the first quarter of 2014, but still more than any other industry. Health care followed in second place with 17 percent of venture capital dollars, up two percentage points from the first quarter of 2014. Mobile and telecommunications companies came in a close third, with 15 percent of VC dollars, up just one percentage point from the prior quarter. 

More significantly, however, over 50 percent of venture-backed IPO exits went to health-care companies in the second quarter, the fifth consecutive quarter that health-care companies have topped technology companies for public exits, CB Insights reports. 

San Francisco led the way for cities that originate venture deals in the quarter, with 96 deals worth $2.3 billion, compared to 61 in New York, which came in second, with $860 million of financing. New Enterprise Associates was the most active dealmaker, followed by Kleiner Perkins Caulfield & Byers, Andreessen Horowitz, and Google Ventures.

Last updated: Jul 10, 2014

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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