VC deal activity hits a nine-quarter low in Q1 2015

With $11.3 billion invested across 805 deals, the amount of funding dropped 18% quarter-to-quarter

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2014 was a big year for venture capital, which saw its best fundraising year since 2007, while investments went up 62% from 2013. So we should all be expecting big things this year too, right?

Well, maybe not. So far, things are not looking good for 2015, at least not according to the Q1 '15 Venture Capital Report released by venture capital database CB Insights on Tuesday.

With $11.3 billion invested across 805 deals, VC deal activity in the first quarter of 2015 hit a nine-quarter low. It also managed to fall for the fourth straight quarter in a row as well. While funding with did remain above $10 billion for the fifth straight quarter, it also dropped 18% from the fourth quarter of 2014.

Things fell apart immediately at the start of this year, too, with deals dropping by 23% from December to January, and funding getting cut in half month-to-month. 

Interestingly, though, when investments from hedge funds, mutual funds and private equity investors into VC-backed companies are also factored in, though, things look a lot better.

VC-backed companies actually raised $17.7 billion in funding in the first quarter of 2015, a new high, though the number of deals into VC-backed companies overall still decreased for the third straight quarter.

Despite the downturn, healthcare is doing well, hitting nearly $2 billion spread across 131 deals, up 34% from the same quarter a year before.

When broken down by stage, it was the earliest stages that took the hits, with deal share to seed stage investments dropping below 30% while Series A deal share also decreased to 27% of total VC deals.

Series B, on the other hand, saw a 5-quarter high, taking nearly a fifth of all deals.

And when it came to percentage of dollars, all stages increased, or stayed the same, except for Series E, which may have been inflated during the previous quarter due to megadeals in companies like Uber, Snapchat, and Lyft . 

The report also outlined the most active venture capital firms, with New Enterprise Associates leading the way, followed by Andreessen Horowitz, First Round Capital, Slow Ventures and Sequoia Capital. 

And, finally, when it came to exits things were way down.

There were only 138 VC-backed exits in the quarter, down 14% from Q4 2014. The reason for that has to do with increased late stage financing, meaning that larger companies can stay private for longer.

There were only 12 IPOs in Q1’15 compared to 24 a quarter prior. and 34 in the same quarter the year before. 

The larger amount of late stage funding has led to a rash of unicorns, or companies valued at at least $1 billion. There were seven new companies to reach that threshold, more than double the prior quarter, but one only unicorn exit: Square. 

(Image source: themerkle.com)