Venture capitalists poured a huge $48.3bn into US start-ups last year, a figure which is the highest on record since 2000, the peak year of the first internet boom which saw $41.7bn invested into online start-ups.
According to the quarterly Money Tree Report issued by PriceWaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters, internet companies raised $11.9bn in 2014 which is up 68 per cent from 2013.
The report said that there were 4,356 venture deals last year which is only 4 per cent more than the 4,193 deals in 2013, however, the value of these deals has greatly increased. ABC News reports that Mark McCaffrey (Global Software Industry Leader, PriceWaterhouseCoopers), said last year saw a record 47 “mega deals” which are defined as investments over $100m, a figure which is double the amount reported in 2013.
One of the biggest deals last year was the funding rounds of investment in web-based taxi firm, Uber which raised $1.2bn. Despite facing legal challenges and controversy over its corporate culture, the taxi service has continued to grow. Other major deals include virtual reality start-up Magic Leap which raised $542m in investment from Google, Legendary Pictures and Qualcomm Ventures, and messaging service SnapChat which raised $485m from Yahoo and others in the third biggest round of the fourth quarter.
Software was the biggest industry reported for all venture capital investment and saw a 77 per cent increase in money invested in 2014. The second leading sector was reported as the biotech industry where start-ups raised $6bn last year, 29 per cent more than in 2013.
According to experts, the surge in investment comes as tech start-ups are performing well in public stock offerings, and shows that investors are recognising the ability of new technology to disrupt and replace traditional industries.
McCaffrey said last year’s surge shows that investors increasingly believe US tech companies are capable of succeeding quickly on a global scale, which will allow them to reach vast markets and gain sizable revenue. He also said that new kinds of investors, including hedge funds or private equity, and corporate investment arms of big companies are now competing with traditional venture capital firms to back talented start-ups.
McCaffrey and other experts said they expect venture funding will continue without any severe drop in 2015, however commercial software companies, such as those that offer tools for analysing large amounts of data cyber-security services, are expected to see big investment in the coming year, along with health and biotech technology.
By Nicole Miskelly. bobsguide Lead Journalist