The VC Money Tree is Flourishing, But Is It Just The Rich Getting Richer?

PricewaterhouseCoopers’ (PwC) National Venture Capital Association’s “Money Tree Report ” for 2014 is now out. You can see it here.

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(Image Courtesy PricewaterhouseCoopers – The Money Tree Report)

At first glance the changes from 2013 to 2014 indicate a strong upward trend:

  • Deal volume is up by 163 or 3.8% – from 4,193 deals in 2013 to 4,356 deals in 2014
  • The amount of venture capital is up $18.4 billion or 61.5% –  from $29.9 billion in 2013 to $48.3billion in 2014
  • The average deal size is up by $4 million or 36% – from circa $7 million to circa $11 million
  • Software still rules the investment roost with $19.8 billion invested in 1,799 deals – up 10% year-on-year
  • Fourteen of the 17 industry categories monitored experienced rises in investment, 
  • Expansion stage businesses were the big winners with $19.8 billion invested across 1,156 deals, while early stage and later stage categories also saw significant increases in investment, and
  • Only seed stage businesses saw a slight decline in the amount invested from 2013 to 2014.

However, despite VC investing delivering 1,020 deals to the tune of $13.4 billion in Q1 of 2015 alone – that’s up over 25% on the same quarter last year and the most since the year 2000 (no dot.com bubble comparisons please) – Fred Wilson of AVC believes a look inside the numbers simply shows that only the rich are getting richer.

Fred Wilson writes: “Round sizes have gone up and burn rates have gone up, but so much of this is limited to a hundred or a couple hundred companies.

“The rest of the market is more or less where it has been for years.

“The rich are getting richer. The middle class is stagnant. And the people who can’t raise a round still can’t.

“Only the top end of the market has really changed over the past five years.”

The bottom line? It’s not just the stats and averages that matter. 

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