Notable Lower Levels in Clean Technology and Life Sciences Sectors; Investors Shift from Seed to Early Stages in 2012

Washington, D.C., January 18, 2013 – Venture capitalists invested $26.5 billion in 3,698 deals in 2012, a decrease of 10 percent in dollars and a 6 percent decline in deals over the prior year, according to the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA), based on data from Thomson Reuters. For the fourth quarter, venture investment of $6.4 billion into 968 companies fell 3 percent in dollars, but rose 5 percent in deal volume over Q3 2012.

Double-digit decreases in investment dollars across most industries, specifically the traditionally capital-intensive Clean Technology and Life Sciences sectors, offset the increases seen in the Software sector in 2012. Additionally, stage of investment shifted from Seed to Early Stage in 2012 as venture capitalists overall began engaging with companies later in their life cycle than in previous years.

"We continue to see the impact of public policy on venture capital investment levels in very specific ways," said Mark Heesen, president of NVCA. "Life sciences investment was suppressed for much of the year, particularly with first-time fundings, due in part to the impact of the regulatory and reimbursement environments, while clean tech investors began moving towards more capital efficient deals less dependent on government support. Simultaneously, investment in information technology flowed, as far fewer obstacles impeded success in those sectors. We hope the coming year brings with it more certainty and encouragement across all sectors than we experienced in 2012."

"General economic uncertainty continues to hinder capital investments, and venture capitalists are no different," noted Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US. "As some expected, 2012 investment levels are less than what we saw in 2011. And, we've seen nearly a third fewer dollars going into even less Seed Stage companies during that same time. As the number of new funds being raised continues to shrink, venture capitalists are being more discriminating with where they're willing to place new bets. At the same time, they're holding on to reserves to continue to support the companies already in their portfolio. Both of these factors are taking a toll on the amount of capital available for young start-ups, which is reflected in the 38 percent drop in the number of Seed Stage companies receiving VC dollars in 2012."

Sector and Industry Analysis

The Software industry maintained its status as the single largest investment sector for the year, with dollars rising 10 percent over 2011 to $8.3 billion, which was invested into 1,266 deals, an 8 percent rise in volume over the prior year. This represented the highest level of investment in the Software sector since 2001. Investment in the fourth quarter of 2012 remained flat in dollars but increased 17 percent in deals from Q3 with $2.1 billion going into 368 companies. Software was also the number one sector in Q4 for dollars invested and number of deals, counting more than double the number of deals during the quarter than the second largest sector, Biotechnology.

Biotechnology investment dollars declined 15 percent with volume flat in 2012 to $4.1 billion going into 466 deals, placing it as the second largest investment sector for the year in terms of dollars and deals. For the fourth quarter of 2012, $1.3 billion went into 135 Biotechnology companies, an increase of 3 percent in dollars and 13 percent in the number of deals from the third quarter when $1.2 billion went into 119 rounds. The Medical Device industry fell 13 percent in dollars and 15 percent in deals in 2012, finishing the year with $2.4 billion going into 313 deals. For the fourth quarter, Medical Devices saw an increase of 32 percent in dollars and 9 percent in deals from Q3 2012 with $581 million going into 74 deals. The Life Sciences sector (Biotech and Medical Devices combined) accounted for 25 percent of all venture capital dollars invested in 2012 compared to 26 percent in 2011. Much of the decline for the year occurred in first-time financings where both Biotechnology and Medical Devices saw the lowest number of deals since 1995.

The Clean Technology sector experienced a 28 percent decrease in dollars and a 23 percent decline in deal volume in  2012, bringing the year's total to $3.3 billion going into 267 deals, compared to $4.6 billion going into 348 deals in 2011. Clean Technology investing accounted for 12 percent of all venture capital dollars in 2012 compared to 15 percent in 2011. In the fourth quarter, venture capitalists invested $535 million into 67 Clean Tech deals, down 36 percent in dollars but up 6 percent in deal volume from $839 million going into 63 deals in the third quarter. For the full year 2012, five of the top 10 deals were in the Clean Tech category; only one of the top 10 deals in Q4 fell into the Clean Tech category. Clean Technology crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation.

Internet-specific companies experienced a 5 percent decline in both dollars and deals for the full year 2012 with $6.7 billion going into 976 rounds compared to 2011 when $7.1 billion went into 1,033 deals. However, the year still marked the second highest level of Internet investment since 2001. For the fourth quarter, Internet-specific investment declined 13 percent in dollars and 5 percent in deals with $1.5 billion going into 242 deals, compared to $1.7 billion going into 255 deals in the third quarter of 2012. 'Internet-specific' is a discrete classification assigned to a company whose business model is fundamentally dependent on the Internet, regardless of the company's primary industry category. These companies accounted for 25 percent of all venture capital dollars in 2012, up from 24 percent in 2011.

Fifteen of the 17 industry categories experienced decreases in dollars invested for the year with only the Software and Retailing/Distribution industries recording an increase. Industry sectors experiencing some of the biggest dollar declines for 2012 included: Business Products and Services (55 percent); Electronics and Instrumentation (46 percent); and Semiconductors (32 percent).

Stage of Development

Investments into Seed Stage companies decreased 31 percent in terms of dollars and 38 percent in deals with $725 million going into 274 companies in 2012, the lowest annual seed dollars since 2003. For the fourth quarter, venture capitalists invested $156 million into 67 seed stage companies, the lowest quarterly dollar investment since 2005. Seed Stage companies attracted 3 percent of dollars and 7 percent of deals in 2012 compared to 4 percent of dollars and 11 percent of deals in 2011. The average Seed stage round in 2012 was $2.6 million up from $2.4 million in 2011.

Early Stage investments experienced an 11 percent decline in dollars but a 5 percent increase in deal volume in 2012 with $7.8 billion going into 1,638 deals. For the fourth quarter, Early Stage investments increased 5 percent in dollars and 9 percent in deals over Q3 2012 with $1.9 billion going into 448 companies. Early Stage companies attracted 30 percent of dollars and 44 percent of deals in 2012 compared to 30 percent of dollars and 39 percent of deals in 2011. The average Early Stage deal in 2012 was $4.8 billion down from $5.6 billion in 2011.

Expansion Stage investments decreased in 2012 by 5 percent in dollars and dropped 6 percent in deals with $9.4 billion going into 956 deals. Expansion funding also dropped in the fourth quarter, dipping 14 percent from the prior quarter to $2.2 billion. The number of deals also decreased during the quarter, falling 2 percent to 240. Expansion Stage companies attracted 35 percent of dollars and 26 percent of deals in 2012 compared to 33 percent of dollars and 26 percent of deals in 2011. The average Expansion Stage deal size in 2012 was $9.8 billion compared to $9.6 billion in 2011.

In 2012, $8.6 billion was invested into 830 Later Stage deals, a 12 percent decrease in dollars and a 9 percent decrease in deals for the year. For the fourth quarter, $2.1 billion went into 213 deals, which represents a 5 percent increase in dollars and a 10 percent rise in deals from the third quarter of 2012. Later Stage companies attracted 32 percent of dollars and 22 percent of deals in 2012 compared to 33 percent of dollars and 23 percent of deals in 2011. The average size of a Later Stage deal fell slightly from $10.7 billion in 2011 to $10.4 billion in 2012.

First-Time Financings

First-time financings fell both in terms of dollars and deals from the prior year, declining to $4.1 billion going into 1,163 companies, a 24 percent decrease in dollars and an 11 percent decrease in deals. However, the dollar level and number of companies receiving venture capital for the first time remained relatively flat in Q4 compared to the third quarter, with $1.1 billion going into 306 companies. First-time financings accounted for 16 percent of dollars and 31 percent of deals in 2012 compared to 18 percent of dollars and 33 percent of deals in 2011.

Industries receiving the most dollars in first-time financings in 2012 were Software, Media/Entertainment and Biotechnology. Industries with the most first-time deals in 2012 were Software, Media/Entertainment, and IT Services. Sixty-five percent of first-time deals in 2012 were in the Early Stage of development followed by the Seed Stage of development at 17 percent, Expansion Stage companies at 12 percent and Later Stage companies at 7 percent.

MoneyTree Report results are available online at and

About the PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report

The MoneyTree™ Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. It is based on data provided by Thomson Reuters. The survey includes the investment activity of professional venture capital firms with or without a U.S. office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments, in a qualified and verified financing round the entire amount of the round is included. Qualifying transactions include cash investments by these entities either directly or by participation in various forms of private placement. All recipient companies are private, and may have been newly-created or spun-out of existing companies.

The survey excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as roll-ups, change of ownership, and other forms of private equity that do not involve cash such as services-in-kind and venture leasing.

Investee companies must be domiciled in one of the 50 U.S. states or DC even if substantial portions of their activities are outside the United States.

Data is primarily obtained from a quarterly survey of venture capital practitioners conducted by Thomson Reuters. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies. Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.

About the National Venture Capital Association

Venture capitalists are committed to funding America's most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. According to a 2011 Global Insight study, venturebacked companies accounted for 12 million jobs and $3.1 trillion in revenue in the United States in 2010. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community's preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites its nearly 400 members through a full range of professional services. For more information about the NVCA, please visit

The PwC Private Equity & Venture Capital Practice is part of the Global Technology Industry Group, The group is comprised of industry professionals who deliver a broad spectrum of services to meet the needs of fast-growth technology start-ups and agile, global giants in key industry segments: networking & computers, software & Internet, semiconductors, life sciences and private equity & venture capital. PwC is a recognized leader in each industry segment with services for technology clients in all stages of growth.

About the PwC Network

PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 158 countries with more than 180,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2013 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.

About Thomson Reuters

Thomson Reuters is a leading source of information for businesses and professionals. Through a wide range of products and services, Thomson Reuters helps clients make better decisions, be more productive and achieve superior results. Thomson Reuters has headquarters in New York and employs more than 50,000 people worldwide.

Suggested Articles

The failure of SAGE-217 to beat placebo wiped more than 50% off Sage’s share price as investors digested the implications of the data.

The data tee Aurinia up to file for FDA approval next year and go on to address a major unmet medical need.

While screening Caenorhabditis elegans for genetic clues to the PI3K/Akt signaling pathway, scientists found a key protein for insulin synthesis.