The 2015 year is now a month behind us. How did venture capital do in 2015? Here’s a look.
Total Capital Invested
The first look is venture capital invested and number of rounds closed by year.
Interestingly, on a total volume basis, 2015 was a banner year for total capital invested. Total capital invested reached $77.3 billion, well above 2014’s already high $68 billion.
On number of rounds closed, the number of rounds surprisingly declined by a fairly hefty amount, going from 9,381 to 8,097. The drop in the number of deals was more reminiscent of the dot-com crash than simply a mid-cycle slowdown in funding of smaller companies.
Source: Pitchbook
A Breakdown by Quarter and Round
What’s was behind the decline in the number of rounds closed an rise in valuations? Perhaps completely unsurprising, the number of rounds dropped by the most amount for very early stage, angel rounds.
The decline in early stage, angel round investing started a precipitous drop in the second half of 2015, dropping from 2,256 in the second quarter to 1,923 in the third quarter. The decline continued into the fourth quarter, declining from the 1,923 to 1,675.
Of course, the drop wasn’t solely the sphere of angel rounds. Early stage venture capital rounds also dropped, although the early stage drop was more gradual and started much earlier. The early stage decline began in the second half of 2014, and continuously dropped from 836 in the second quarter of 2014 to 536 in the final quarter of 2015.
Interestingly, the number of rounds also dropped for later stage venture capital investments, although the drop in the number of later stage venture capital rounds was quite marginal.
Source: Pitchbook
The Industries
With the broad macro view established, what industries are behind the figures? An industry detailed look follows.
Unsurprisingly, Commercial Services far outpaced all other sectors, largely because Commercial Services captures such a broad swath of activity. In 2015, the number of Commercial Services deals dropped to 2,940 from 2014’s 3,646.
In a distant second was Energy at 1,889, a slight increase from the 1,859 in 2014. Given the weakness in oil prices and other natural resources, the continued strength in Energy is somewhat surprising. Then again, the Energy sector includes alternative energy, a sector yet to be deterred by cheap oil.
On the other end of the deal spectrum, the smallest 3 sectors including Pharma & Biotech (150 in 2015), IT Hardware (251 in 2015), and Software (320 in 2015).
Source: Pitchbook
The Dollars Behind the Sector Look
Lastly, here’s a look at the dollars behind the sector level deals. A generally similar view to the number of deals look materializes.
On top is Commercial Services at just over $31 billion, followed by Energy at $13 billion, Consumer Goods & Recreation at $9 billion, and Media at $8 billion. On the other end, smaller dollar volume sectors included Pharma & Biotech at about $1.5 billion, IT Hardware at $2.4 billion, and Software and Healthcare each at about $3 billion.
Source: Pitchbook
Conclusion
2015 was an amazing year for venture capital. According to Pitchbook, venture capital managers invested $77.3 billion in companies, well above 2014’s incredibly high $68 billion.
On a sector look, Commercial Services dominated the deal flow, as has been the case for some time. Overall, comparatively speaking, the venture capital industry is doing quite well.
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