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January 08, 2014
Earlier in the week we took a look at the overall global venture capital landscape in 2013 and found that valuations were up across the board, deal flow was mixed and VC firms had a banner year fundraising. But how did different regions fare in 2013?
The Bay Area, the global hub of venture capital activity, saw a 10.6% decline in deal flow from 1,370 financings in 2012 to 1,225 in 2013, new PitchBook data show, but investors funneled more money into those fewer deals as capital invested increased to $13.4 billion last year from $12.5 billion in 2012. Much of the slump in deal activity can be attributed to a 12.7% drop in the number of rounds for software companies, in addition to similar declines among media and healthcare devices & supplies companies. Commercial services picked up some of the slack with 154 deals in the Bay Area, up from 123 in 2012.
One interesting note is that the number of angel/seed deals in the Bay Area dropped for the first time since 2008. There were 337 such financings in 2013, compared to 395 in 2012. But this shouldn’t signify a slowdown in the phenomenon commonly referred to as the “Series A crunch,” at least in Silicon Valley, as the ratio of angel/seed to early stage investments last year remained similar to 2012 levels.
A previous PitchBook Blog article noted that increasing seed valuations might be worsening the Series A crunch, but valuations were up across the board in the Bay Area, with the median pre-money valuation for angel/seed financings hitting an all-time high of $5.64 million in 2013. The overall Bay Area pre-money valuation last year was $22.7 million. As Silicon Valley’s valuations skyrocket, VC investors may be seeking to invest their money in companies outside the region, where they can get more value for their cash.
This bears out in the data, as the Bay Area has seen its share of global venture capital deal flow shrink every year since it hit a 10-year peak in 2006. The region comprised 27% of deal flow and 30% of capital invested that year. In 2013, it was 20% and 27%, respectively.
One place where those percentages have been increasing is Europe. The continent saw its share of global VC deal flow grow from 19% in 2009 to 23% last year, as the number of investments stayed at a relatively steady 1,466. In 2012, there were 1,508 VC investments in Europe. Capital invested rose sharply from $7 billion in 2012 to $9 billion last year.
Most regions within Europe saw pretty steady deal counts from 2012 to 2013, except UK & Ireland, which dropped from 512 VC financings to 468, and GSA (Germany, Switzerland, Austria), which increased from 270 to 294. Capital invested also increased in GSA to $1.56 billion in 2013, up from $1.22 billion in 2012 and $720 million in 2009.
Germany, being the main anchor country in its region, accounted for 81.3% of the VC investments and 65.4% of the capital invested in GSA.
Overall, Europe saw an increase in the number of angel/seed financings from 267 in 2012 to 319 in 2013, as well as a 7% decrease in early stage rounds from 922 to 860 over the same period. It’s too early to tell whether this is the beginning of Europe’s own Series A crunch, but in the United States, rapid expansion of seed rounds and steady or declining follow-on financings have been the primary cause.
For a look at European private equity trends in 2013, click here.
Both the number of financings and capital invested declined in Boston and the Pacific Northwest (defined as Washington and Oregon in this article) in 2013. But while the Pacific Northwest (PNW) saw its overall median pre-money valuation increase slightly from 2012 ($13.4 million to $14.7 million in 2013), Boston’s fell from $15.6 million in 2012 to $14.2 million last year.
VC investors continued to invest in PNW software companies, with $470.5 million invested across 99 rounds in 2013. Both those totals are up from 38 and $241.4 million in 2004, showing steady growth in the startup and tech scene in Seattle and Portland. But while software becomes a larger part of the PNW venture capital ecosystem, 2013 was a lackluster year for investments in pharma & biotech. Pharmaceuticals & biotechnology companies completed 12 rounds worth $244.3 million in 2013. In 2012, the region saw 23 financings in the sector.
Of course, Boston is more well known for VC investments in its healthcare sector, but it too had a lackluster year in 2013. Investment in pharma & biotech was steady at 48 deals in both 2012 and 2013, but there were only 19 healthcare devices & supplies financings last year, compared to 37 in 2012.
For an in-depth look at the region-by-region data, check out all our datagraphics below.
Featured image courtesy of Thomas Wolf, Wikimedia Commons.