Early Stage Investments Keep VC Numbers Positive

According to the latest MoneyTree report from PwC and the National Venture Capital Association, the number of deals and dollars are up from earlier in the year. Venture capitalists invested $6.7 billion in 913 deals in Q2 2013—an increase of 12 percent in terms of dollars and 2 percent in the total number of deals. However, both are the lowest totals for the same quarter since the global financial crisis wreaked havoc in 2009.

The increase can be attributed to an increase in early stage investments which reached their highest Q2 point since the heyday of 2000 with $2.47 billion invested in 480 deals. All other stages witnessed drops in number of deals when compared to the first quarter.

“The increase in early stage investing is an encouraging sign that entrepreneurs with innovative ideas can get the funding they need to succeed,” stated Mark McCaffrey, global technology partner and software leader at PwC US. "As the exit window continues to open, we’ll continue to see VCs shifting their focus back to companies in the earlier stages of development. In particular, startups that are able to drive innovation by developing disruptive technologies that are easy to deploy and deliver ongoing value to the user will be of great interest to venture capitalists.”

However, the gain for early stage investment comes at a price for seed stage. For the first time since 1997, the amount of dollars invested in seed stage deals dropped from Q1 to Q2—dropping 34 percent in terms of dollars and 29 percent in deals.

Time will tell if the trend is a shift to “earlier stages” or if both ends are pushing toward the middle.

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