U.S. Venture Investment Continues to Fall in Fourth Quarter, 2012 Ends Down From Previous Year

NEW YORK, Jan. 18, 2013 (GLOBE NEWSWIRE) -- Investment into U.S. venture-backed companies continued its year-over-year decline in the fourth quarter of 2012, as U.S.-based companies raised $6.6 billion from 733 venture capital deals, according to Dow Jones VentureSource. The drop represents a 20% decrease in capital and a 17% decrease in deals from the same period in 2011.

During 2012, venture capital investment totaled $29.7 billion for 3,363 deals, a 15% decline in capital and a 4% decline in deals from the previous year.

"This quarter's drop in venture capital investment marks the third time on record that a fourth quarter has been the lowest of the year," said Maryam Haque, senior research analyst for Dow Jones. "Investors became increasingly cautious as exit activity and venture capital fund-raising declined in the latter half of 2012, which seems to have hindered many startups' efforts to raise money before the year ended."

While the median amount invested in a financing round fell 15% from $5 million in 2011 to $4.3 million in 2012, the median investment for the fourth quarter increased 11% in 2012 to $4.7 million.

Corporate deals dominate for first time in over a decade

In 2012, corporate investment saw its best year since 2000.

  • Eight corporate deals garnered $220 million in the fourth quarter, a 32% increase in capital despite 50% fewer deals compared to 2011.
  • Foxconn's $200 million corporate investment into Woodman Labs, Inc. represented the second highest equity investment of the fourth quarter.
  • GreatPoint Energy, Inc. was the largest equity investment of the year, raising $420 million in capital from China Wanxiang Holdings.

IT remains investor favorite

Information technology (IT) continued to attract investors throughout 2012, accounting for 33% of the total venture capital investment.

  • 1,194 deals raised $9.9 billion, a 15% and 7% increase in capital and deals, respectively, from the $8.6 billion garnered by 1,111 deals in 2011.
  • Software investments dominated the industry, with 942 deals garnering $6.5 billion, a 14% increase in deals and a 29% surge in capital from the previous year.

Healthcare, Consumer Services and Business/Financial Services continue to struggle as year ends

Although investment in healthcare companies increased quarter over quarter in 2012, the industry raised 19% less capital compared to 2011.

  • 682 deals raised $7.1 billion in 2012, a 12% decrease in deals compared to the 777 deals that netted $8.8 billion the year prior.
  • Biopharmaceuticals deals dropped 14% and 17% in deals and capital, respectively, as 266 deals raised $3.5 billion.
  • Medical devices and equipment fell 10% in deals and 21% in capital as 285 deals raised $2.7 billion.

Consumer service investments also declined in 2012, dropping below 2010 levels.

  • 670 deals raised $4.4 billion, a 29% decrease in capital from the 674 deals that garnered $6.3 billion in 2011.
  • Consumer information services accounted for much of this drop, as 465 deals raised just $2.8 billion, a 39% decrease in capital from the $4.6 billion raised across 500 deals last year.

Despite showing positive signs for exit markets and raising over $1 billion in each of the first three quarters, companies in the business and financial services sector saw a significant drop in the fourth quarter, raising $688 million through 101 deals.

  • 507 deals netted $5 billion in 2012, representing a 17% and 18% decrease in deals and capital, respectively, from 2011.
  • Investment in the largest segment, business support services, fell 17% from $4.5 billion in 2011 to $3.8 billion in 2012.

Energy/Utilities plummet

Investment in energy and utilities saw its worst year since 2006 in terms of both deals and capital raised.

  • 92 deals raised just $1.7 billion, a 35% decrease in deals and a 47% decrease in capital from the 142 deals that netted $3.3 billion in 2011.
  • Although renewable energy accounted for the majority of energy deals, the segment also had its worst year in six years, with just 69 deals raising $1.2 billion.
  • Renewable energy decreased 61% and 40% in capital and deals, respectively, from the $3 billion raised across 115 deals the previous year.

Industrial Goods/Materials show slight uptick

Other than IT, investments in industrial goods and materials were the only bright spot for venture capital financing in 2012. The industry raised $943 million across 104 deals, a 5% decrease in deals and a 3% increase in capital from the 110 deals that raised $918 million during 2011.

For information on Dow Jones VentureSource's research methodology, visit http://bit.ly/VSFAQs. For general information about Dow Jones VentureSource, visit http://www.dowjones.com/privatemarkets?from=pr-privatemarkets.

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CONTACT: Media Contacts: Erin Carpenter Dow Jones & Company erin.carpenter@dowjones.com 212 416 4874

Source:Dow Jones & Company