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Venture capital deals activity edges up in Q2 2012

There were 1,249 venture capital financings announced during quarter two 2012, representing an aggregate value of USD10.9bn, according to Preqin’s deal flow data.

This is a 16 per cent increase in both the number and value of VC deals in comparison to Q1 2012, and is the largest amount of aggregate capital committed by VC firms since Q3 2011.

The data shows that 67 per cent of the number and 75 per cent of the aggregate capital of VC deals announced in Q2 2012 occurred in North America, with 839 VC financings in the region valued at USD8.2bn during the quarter. This is a 14 per cent increase in comparison to the previous quarter, when 734 VC financings valued at USD7.2bn were announced.

European VC activity experienced a 23 per cent rise in the number and a 25 per cent increase in the value of VC deals in comparison to the previous quarter. A total of 252 European deals took place during Q2 2012, valued at USD1.4bn.

The number of Chinese VC deals continued its slide in Q2 2012, with 27 VC deals announced in the country during Q2 2012. This represents a 20 per cent drop from Q1 2011 levels and a 42 per cent decrease from Q4 2011, largely due to investor worries regarding the Chinese exit market.

However, while the number of VC deals in China dipped in Q2 2012, deal value almost doubled in comparison to the previous quarter, with USD545m invested in the region. This is up from USD280m in Q1 2011, but still lower than the USD798m worth of VC deals completed in Q4 2011, and is in large part due to the USD216m series C financing of Xiaomi.

There were 75 VC deals announced in India during Q2 2012, a 32 per cent increase from the previous quarter, representing the most active quarter for Indian deal flow during the 2010 – H1 2012 period in terms of number of deals

Seventeen VC deals were reported in Israel during the period, matching activity in the region witnessed in recent quarters, representing an aggregate value of USD200m.

A third of all deals globally during Q2 2012 were angel, seed or series A deals, displaying investors’ attraction towards very early stage investments. Additionally, series B, C, D and later investments accounted for less than 20 per cent of the number of all deals.

Venture capital-backed add-on deals made up seven per cent of all VC transactions in Q2 2012.

The average VC deal value in 2012 YTD has been USD14.1m per deal. This is down on 2011, when the average VC investment totalled USD17.9m per round, but very similar to deal values witnessed during 2010.

In Q2 2012, more than a quarter of the total number and aggregate value of financings globally was invested in the internet sector, which includes social networking and e-commerce deals.

The healthcare and software sectors each accounted for around 16 per cent of the total number of VC deals, while clean technology companies accounted for 13 per cent of the aggregate value of investments.

“For the second successive quarter, the number of venture capital deals completed has risen in comparison to the previous quarter,” says Manuel Carvalho, manager – private equity deals, Preqin. “The number of VC transactions in Q2 2012 increased by 16 per cent from the previous quarter, and is 27 per cent higher than in Q4 2011. In addition, the aggregate value of venture capital investments has increased by 16 per cent from Q1 to Q2 2012.

“These gains have been led by deals in the US, Europe and India, while the Chinese VC market has continued to slide downwards across recent months, with investors concerned by a perceived lack of exit opportunities in the region.

“With a third of all VC investments made across seed, angel and series A early stage rounds, it is clear that despite a difficult deal and exit environment, LPs and GPs alike have a continued interest in financing high-growth potential companies. This interest in such opportunities has allowed VC to prevail despite the current weak wider economic environment.”

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