Venture capital hits a post-2000 high point

[WASHINGTON] Investors poured more venture-capital money into companies during 2014 than in any year since the turn of the century, according to a report released on Friday.

Companies collected a staggering US$48.3 billion in 4,356 separate investments throughout the year. That marks a 61.4 per cent increase compared with the nearly US$30 billion raised in 4,193 deals in 2013.

The National Venture Capital Association and PricewaterhouseCoopers publish the quarterly report, which uses data from Thomson Reuters to tally the venture-capital deals in each of the major metropolitan regions.

According to the report, the US$48.3 billion figure is the largest amount since 1999 and 2000, when companies raised US$54.9 billion and US$105 billion, respectively. Those hauls largely preceded the burst of the tech bubble and the subsequent stock market decline.

The 2014 figure was lifted in large part by a series of massive investments, including several worth more than a quarter-billion dollars. These mega-deals are a relatively new phenomenon in the venture-capital industry and often come at a time when the company might otherwise go public.

"A lot of the money that you see in the dramatic increase is going to a very select number of companies," said John Taylor, head of research at the National Venture Capital Association.

"Call it a statistical outlier effect, but certainly the numbers are driven by these large investments."

The year's most notable mega deals went to Uber Technologies, the company behind the popular but controversial taxi alternative. Uber raised US$1.2 billion from investors in June - the largest single investment in the report's 20-year history. In December, the company did it again.

These large deals are possible in part because financiers with deeper pockets, such as hedge funds, mutual funds and private-equity shops, are starting to fund growing companies alongside traditional venture capitalists.

"Part of this mega-deal trend is that we're seeing nontraditional investors, namely private-equity firms, come in and invest," said Brad Phillips, director of emerging company services at PricewaterhouseCoopers.

"Private-equity firms are coming into tradition venture deals... and have more of a buy-and-hold mentality."

Washington-area companies posted a strong showing for the year, collecting US$1.08 billion in 196 separate investments. That's down compared with the US$1.58 billion raised in 2013, a banner year for the region, but it's still the second-largest sum since the recession. The Washington region includes the District of Columbia, Maryland, Virginia and West Virginia.

WP