What Did VCs Invest In 2014

Every year i summarize startup investment trends and suggest emerging trends. Here is my post last year. The source of my views is the startups i see together with data from AngelList, Mattermark, MoneyTree, NVCA and CBInsight.

The volume of activity and the high valuations would not surprise anyone in the industry. Many have written about that but the following data would highlight the magnitude of the trend: Total deal volume grew 8% to about 3600 deals in 2014, consistent with the growth over the last 3 years on average. Total funding, on the other hand, grew 62%, after 3 years of little to no change.
VC-funding-annual
The growth in volume was mainly attributed to seed deals that grew over 12%, gaining share over other stages. The growth in seed stage deal volume is even more significant, compared quarter by quarter to 2013: 25% growth in Q1, Q2 and Q4 over last year. Value wise total funding grew mainly in early/mid stage (seed to round B) on account of late stage investments.
Venture funding is a marketplace and just like any other marketplace is impacted by supply and demand. Growth in total seed deals drove average seed valuations to a peak of $1.9M, almost a 50% climb compared to Q1/12.
EarlyStageValuation
Looking by sector, majority of the growth in volume is attributed to internet (up 7%) and mobile (10%) investments. Majority of the funding growth is also attributed to internet (up 67%) and mobile (up 109%). Looking at the trend across the last 4 quarters tells a more interesting story. Internet investments by volume and funding declined in Q3 and Q4, while mobile investments by volume and funding presented a steady increase. Total funding actually increased from $1.2B in Q3/14 to $3.1B in Q4/14 ! a large part of that is attributed to Uber’s $1.2B funding but even if you discount the Uber investment, funding doubled in Q4.
(I’ve been bearish about mobile for over three years now).
By sub-sector health and wellness and social take the lead on video. Application development and conferencing also experience traction. Mixpanel closed last month a $65M round. HockeyApp just announced being acquired by Microsoft.
Internet wise business intelligence and advertising account for 17% of total deals. Education is also taking front stage. Some notable companies include Clever  – self paced learning, Novoed – Social learning, SurveyMonkey and Qualtrics – Online surveys.
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About shanishoham

After 14 years of General Management and incubating/scaling new businesses & organizations for enterprises (established a $55M mobile business and a $100M/400 employees global division), I became an investor Today I’m a board member/mentor with 5 incubators & micro-VCs and involved with many other private & public incubators around the world. I also founded a VC firm named 2020 and I'm a member with a number of angel groups so i get to see & work with many startups, innovation centers and other parties across the ecosystem. I’m an alumnus of the Stanford Graduate School of business - Sloan Master in Management program, a 10 months intensive program for 57 carefully selected experienced Executives and leaders from all around the world.

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