The median amount invested in a financing round fell 13 percent to $4 million. The big surprise, considering the successful IPOs of consumer Internet companies like LinkedIn and Zynga, is that investment in consumer Internet companies suffered the most. Investment in the sector that includes social media, entertainment and shopping services like Groupon and Gilt Group, fell a whopping 76 percent while deals fell 17 percent.
To be fair, the comparisons to last year for that key consumer Internet sector are quite tough. A year ago, the investment totals were bolstered by large investments into Zynga and LivingSocial —those two companies alone together raised $870 million.
Companies like Facebook, Zynga, and Groupon drew billions in venture investment over the past few years—and now they’re mature and have either gone public or are about to. The big question is whether venture investors turn their attention to a new group of startups, with similar aspirations to take them public down the line. The improvement in the public markets—and the opportunity to exit VC investments—could lead to a spike in financings.
But angel and venture investors keep telling me that the bar is higher than ever. Unlike the Internet boom a decade ago, they’re making sure that their investments have the fundamentals—like revenue and (eventually) profit—to justify a massive sale or an IPO. And I hear that startups don’t need as much money as they used to, to get a business up and running and prove a model.
So where was the growth last quarter? The IT industry was the one sector that saw both deals and investment increase. Software accounted for the largest proportion of IT deals, as this group of companies raised 14 percent more capital with 2 percent more deals.
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