January 06, 2014
The number of global venture capital deals completed in 2013 declined from 2012’s total by more than 10%, after rising each year since 2009, new data released today by PitchBook show. Though the number of deals decreased from 6,991 to 6,185, total capital invested actually increased from 2012, showing that companies are landing bigger funding rounds and, in turn, bigger valuations. Pre-money valuations rose across all stages in 2013, from seed/angel deals all the way to Series D and above. Overall, the median pre-money valuation in 2013 was $17 million, compared to $15.3 million in 2012.
Higher valuations have been leaving VC-backed companies primed for exit, and 2013 was the year IPOs made a resurgence. Last year was the first time since 2007—when there were 127 VC-backed initial public offerings—that there were more exits via IPO than buyout, with 107 companies going public, compared to 90 getting acquired by private equity firms. Globally, the number of VC exits decreased from 868 in 2012 to 797 in 2013, thanks largely to a 105-deal drop in corporate acquisitions. Meanwhile, the median VC exit size jumped quite significantly from $50.6 million to $60 million, driven up by an increase in the number of IPOs, which tend to be the largest VC exit type, and a decline in corporate acquisitions. Additionally, several industries—such as commercial services, retail and pharmaceuticals & biotech—went against the trend and saw an increase in exit count.
Fundraising in 2013 saw similar contrasts. While the number of closed funds and total capital raised both decreased from 2012’s totals, the median fund size actually increased from $50 million to $54 million. While 74% of VC funds met their fundraising target in 2013, global VC funds took an average of just nine months to close, a whole three months less than in 2012 (12 months). The year was highlighted by Greylock Partners’ $1.1 billion mega-fund, Greylock XIV, the only vehicle to eclipse the billion-dollar mark in 2013.
“2013 marked the third straight year of robust venture fundraising, investment and exits. Our research indicates that 2014 should be another strong year for venture capital activity, although it’s not all rosy,” said Adley Bowden, senior director of analysis at PitchBook. “We see challenges impacting the industry this year, including limited partner apathy on the fundraising side, inflated valuations causing funding crunches on the company side and liquidity pressures on the exit side.”