Data published by market research firm CB Insights shows that there is sharp increase this year in the number of venture capital financing rounds exceeding $100 million. So far this year, a total of 20 venture capital funding rounds have been in excess of $100 million, well above 12 such large deals in 2012, and 10 such deals in 2010. In the year 2011, investor fervor for social media companies such as Facebook, Groupon and Zynga resulted in an impressive 28 venture capital deals above $100 million. Besides red hot startups such as Pinterest and Snapchat, enterprise flash storage firm Pure Storage, and big data specialist MongoDB had venture capital rounds that topped $100 million this year.
Corporate Participation Driving Large Deals
Data from CB Insights shows that the increase in large value venture capital deals is a result of increased participation by corporate venture capital firms such as Google Ventures and Intel Capital in funding promising companies. Corporate participation in large tech venture capital deals in 2013 is about 40 percent, a substantial increase compared to 22 percent in 2009. It is worth noting that while financial venture capital firms are finding it difficult to raise money from limited partners as a result of underwhelming performance in recent years, the 30 largest publicly traded tech companies including Google, Apple, Oracle, Hewlett Packard, Intel have a combined cash pile of $180 billion on their balance sheet.
Commenting on the current venture capital funding environment, Craig Hanson, a venture investor with Next World Capital in San Francisco says startups are raising twice what they used to. Tech entrepreneur Tony Jamous who is raising money for his startup Nexmo, which helps mobile messaging apps gain access to telecom networks says there is so much money right now in the market that he is finding it a challenge to keep the funding round small.
Notable Large VC Deals
Among deals that topped $100 million this year is Pinterest which raised $200 million at the start of the year in a round led by VC firm Valiant mapital Partners. Cloud storage provider Box, whose venture capital investors include Andreessen Horowitz, Bessemer Venture Partners, General Atlantic and New Enterprise Associates did a $100 million round in December. Amazon competitor ShopRunner raised $206 million in October, while Pure Storage which competes with bigger storage rivals EMC and NetApp raised $150 million with participation from Greylock Partners, Redpoint Ventures and Samsung Ventures. New York based Fab raised $150 million in June with participation from Atomico, Andreessen Horowitz, and Menlo Ventures while database technology firm MongoDB which competes against Oracle, IBM, and SAP raised $150M in October with participation from Intel Capital, NEA, Red Hat and Sequoia Capital.
This year also saw strong inflow into big data startups. Venture capital firms committed $3.6 billion this year on startups focused on big data, almost three quarters of similar investments between the years 2008 and 2012.
Investor Optimism For 2014 High
A recent survey of 71 venture capitalists and 136 CEOs of venture backed companies by the National Venture Capital Association and DJX VentureSource found that 59 percent of venture investors expect an overall increase in the amount of venture capital investment in the US in 2014. A similar survey conducted a year ago found only 27 percent of venture capitalists expecting higher venture investment. The survey also found VCs expecting improved returns for the industry next year. Approximately 70 percent of CEOs of venture backed companies plan to take advantage of the conducive investment climate to raise additional financing in 2014.
Robert Hohman, CEO of startup Glassdoor which provides insight into employee compensation information says the influx of venture dollars into the market have led to massive increases in salary and have made it tough for startups without big funding to attract engineers.
