VENTURE CAPITAL

Venture Capital Deals Drop in Second Quarter

Still, Fab.com raised $150 million in the largest transaction of the period.
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In April, May, and June, U.S. venture capital investment had its worst quarter--in both number of dollars and deals--since 2010, according to the Dow Jones VentureSource quarterly report released yesterday.

Overall in the second quarter, 801 U.S. companies raised $7.2 billion in venture capital money. That was down 2 percent in dollar terms, and 0.5 percent in number of deals completed, compared to the first quarter of 2013. 

VC investment in the second quarter of 2013 was also lower than the second quarter of 2012, when venture capital firms invested $8.91 billion in 959 companies; it was down 19 percent in dollar terms and 16 percent in number of deals.

The second quarter $7.2 billion in VC investment was the smallest total sum since 2010, when VCs invested $5.3 billion and $6.1 billion in the first and third quarters, respectively, according to Dow Jones analysis.

Still, there were some notable VC deals in the period, and they were by no means confined to Silicon Valley.

Fab.com in New York, a flash sale site that offers indie designer housewares, accessories, clothing, and jewelry, raised $150 million--the largest transaction of the quarter. In Fayetteville, Arkansas, Acumen Brands, an online retailer that sells outdoor apparel, work wear, and medical scrubs, raised a $83.16 million VC investment, and in Ohio, TOA Technologies, a mobile workforce management software raised $66 million. Two big deals, tied for third-highest VC financings at $70 million, were in the Bay Area: Twilio in San Francisco, which helps developers incorporate text messages and other phone services into apps, and Alvine Pharmaceuticals, a biotechnology company in San Carlos, California that is focused on autoimmune and inflammatory diseases.

The five most active American VC investors this quarter were: 500 Startups with 25 deals, New Enterprise Associates with 17, Andreessen Horowitz (which invested in Fab.com) with 17, Google Ventures with 16, and USVP Management Company, 14.

In terms of VC financings by industry, most sectors saw an increase in amount raised, with the largest allocation (29 percent of total equity investment) to information technology; it had 238 deals at a total of $2.1 billion. The second-largest sector, health care, saw 168 deals at $1.9 billion, but dipped 8 percent from the previous quarter. Consumer goods suffered an 80 percent drop from the previous quarter.

At the same time, the Dow Jones VentureSource report found venture capital firms are raising sizeable funds to invest going-forward. In total, VCs raised 50 funds at a total of $6.8 billion in the second quarter of 2013, a 48 percent increase compared with the first quarter of 2013. The first half of the year was up 4 percent compared to the same period in 2012.

Though there were fewer acquisitions of VC-backed companies than in any quarter since 2009, with 84 completed deals at a total of $8 billion in the second quarter of 2013, there were some memorable pairings.

The biggest was Google's acquisition of Waze, a social-based traffic and navigation app that allows users to share real-time info with one another for $1.3 billion, followed by AstraZeneca's purchase of Pearl Therapeutics, which develops treatment therapies for respiratory diseases, for $1.15 billion. That was followed, in deal size, by Yahoo's $1.1 billion deal for Tumblr, in May.

Last updated: Jul 19, 2013

WILL YAKOWICZ | Staff Writer | Reporter, Inc.com

Will Yakowicz is a staff writer for Inc. magazine. He has covered business, crime, and local politics for The Brooklyn Paper and was the editor of Park Slope Patch. He has also reported in the West Bank and Moscow for Tablet Magazine. He lives in Brooklyn, New York.




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