Deals

Uber leads the way as VC deals jump 12% in Q3: $7.8B invested in 1,005 startups

Image Credit: Uber

The $258 million invested in on-demand car service Uber led the way this past quarter as venture capitalists poured $7.8 billion in 10,005 deals in the past three months.

The big surprise? Software.

The overall numbers are up 12 percent from the second quarter and up slightly from 2012 numbers, but the software industry specifically received more money than in any previous quarter since 2001, 12 years ago. Venture capitalists invested $3.6 billion into software companies in 420 deals, up 23 percent from last quarter.

Q3 2013 VC investments by industry

Above: Q3 2013 VC investments by industry.

Image Credit: John Koetsier

That includes big deals such as $196.5 million for Palantir, which makes data analysis software; $80 million for Clarabridge, which does the same for unstructured data; $70 million for Deem, which makes business management software; and $65 million for Toa Technologies, which makes mobile workforce software.

“It’s an exciting time to be an entrepreneur with a software company,” Mark McCaffrey of PriceWaterhouseCooper said in a statement. PwC, the National Venture Capital Association, and MoneyTree cooperated to build the report. “The continued increase in valuations for innovative and disruptive technologies in software-related companies, coupled with the increase in exit activity, is driving venture capitalists to make more investments in this space.”

The 10 biggest deals of Q3 2013

Above: The 10 biggest deals of Q3 2013.

Image Credit: John Koetsier

And the future looks good, too.

It looks like the last quarter of 2013 will see the full-year numbers drive over 2012′s investment totals. And since many of the deals in this past quarter’s $7.8 billion worth of investment were early stage and seed stage deals, there’s plenty of room for optimism.

“We are balancing this optimism, however, against the recognition that VCs are still trying to gain exits for the previous generation of companies,” John Taylor, the head of research at the National Venture Capital Association, said. “There is some improvement on that front, but we would like to see it strengthen even further.”

Translation: IPO markets, please show us some love.

Software was king, but biotech was queen, as investors poured $852 million into 123 deals. That’s down 39 percent in dollars, but up 10 percent in deals, suggesting that this past quarter was more about startups than big follow-on deals for promising companies. And the closely connected Medical Device industry saw $566 million in 65 deals, which was up 12 percent in dollars and down slightly in deals.

VC investment by U.S. region

Above: VC investment by U.S. region

Image Credit: John Koetsier

Fewer deals went into Internet-only companies this quarter, with $1.5 billion going into 252 companies — 19 percent fewer dollars, nine percent fewer deals.

Seed stage dealflow was up, however, with 12 percent more deals — 48 — for a slight drop in dollars, $146 million. And early stage deals also jumped, with dollars up 7 percent and deals up 8 percent. The average seed round was $3 million in the past quarter, and the average early-stage deal was $5 million.

“With more than half of this quarter’s deals coming from early and seed stage deals, there’s credible reason to be optimistic about the future of innovation and the vibrancy of the startup ecosystem,” the NVCA’s Taylor said.

As usual, Silicon Valley vastly outpaced the rest of the U.S. in terms of investment volume.

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