In light of some highly successful venture capital exits in recent years, the industry has witnessed aggregate capital invested in angel/seed venture capital deals globally increase significantly, as fund managers try to seek out the next ‘home-run’ investment, according to Preqin.
US$1.1bn was invested in 1,313 angel/seed deals between January and November this year, compared to US$633mn in 788 deals during the same time period in 2011.
However, the aggregate value of Series A venture capital financing, the investment round that follows angel/seed, has not seen the same level of growth; in fact, it has fallen from 896 investments totaling $5.5bn in January-November 2011 to $4.9bn invested in 872 deals during the same period in 2013.
Other Key Facts:
- The venture capital industry has witnessed a 375% increase in the global number of annual angel/seed venture capital investments between 2008 and 2012.
- The number of annual Series A financings has fallen by 5% across the same period.
- In 2013 so far, 62% of the aggregate capital invested at the angel/seed stage has been directed towards companies operating in the internet sector and software related industries.
- Of all companies that received their initial angel/seed financing in 2010, 20% raised a Series A funding within a year, but just 7% of companies that raised their initial angel/seed investment in 2012 have been able to complete a Series A financing within a year.
- In the period 2008 to present, venture capital firms 500 Startups, Y Combinator and SV Angel have been the most active angel/seed investors, participating in a combined 14% of these financings.
Ignatius Fogarty, head of Private Equity Products, Preqin, said: "With an increased level of angel/seed funding in recent years, the pool of companies aiming to raise the next round of funding, Series A, has grown significantly. Series A investment activity has failed to keep pace with the volume of angel/seed funding, resulting in an environment in which it is increasingly difficult for companies to progress seamlessly to the next round of investment and causing concern in the industry over a "Series A" crunch. Already, over half of angel/seed investments have traditionally not received follow-on financing. But now, with the recent significant growth in angel/seed financings, if Series A funding does not increase to keep pace in 2014, many more young companies will not receive the follow-on financing they need to grow and develop further."