Chart 1 to the left displays the amount of dollars invested by venture capital firms into companies since 1980. The obvious outlier is the dot com era of the late 1990s. It seems as though the amount of money invested by venture capital firms accelerated in 1995, perhaps because of the Netscape IPO and the start of the commercialization and accessibility of the Internet. Total dollars invested had a marked upswing in 2014 to levels not seen since 2000. A possible explanation for 2014 could be the large rounds in late stage companies like Uber, Dropbox, Airbnb, and others.
Per Chart 2, the number of companies invested by venture capital firms is trending upward, but not at an alarming rate (Chart 1). It seems as though the growth rate is sustainable. The number of companies funded tracks the amount of money invested by VC firms (Chart 1) until recently. Not shown is that quarterly venture capital investment declined for the first quarter of 2015 by 10 percent in terms of dollars and 8 percent in the number of deals, compared to the fourth quarter.
First-time financing dollars decreased 30 percent to $1.8 billion in Q1 (2015) while the number of deals was down 18 percent from the prior quarter, dropping to 305. First-time financings accounted for 14 percent of all dollars and 30 percent of all deals in the first quarter of 2015.
The amount of money shown in Chart 5 as a percentage of each stage further enforces the idea discussed in Chart 1, with expansion stage companies receiving the bulk of venture capital dollars.
Not shown is that for the first quarter of 2015, the software industry continued to receive the highest level of funding of all industries, despite being down for the quarter.
The greatest number of companies that received venture funding was in the early stage round, with more than 50% of companies in seed and early stage. Not since 1996 have the number of companies been greater than 50% and not since the mid 1980s has this happened more than two years in a row. This, again, is a positive for Aristos Ventures as the firm focuses on early stage companies. Seed is trending downward perhaps because individual investors are entering the market via crowd funding or other means.
The IPO market for venture backed companies is struggling with just 81 in 2013 and 115 in 2014. Studies show that about 140 venture capital back IPOs should come to market each year. 2008 was a tumultuous year for many reasons one of which is that just 8 VC backed companies went public. Not a concern for Aristos Ventures as the strategy for the portfolio companies is to be acquired.