The amount of capital invested by venture capital fund managers in young companies reached USD87bn in 2014, over 58% more than the capital invested in 2013. Preqin’s Head of Private Equity Products, Christopher Elvin (pictured), analyses the latest data:
Over the past year, a total of 7,474 venture capital financings were announced globally with an aggregate value of USD86.6bn. This represents an 11% fall in the number of financings taking place compared to 2013, but a 58% rise in the aggregate value of deals compared to the previous year.
*Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases
Companies located in Asia and other regions outside North America and Europe have been the primary benefactors of this increase in financing, with the amount of capital invested across these regions up 160% in 2014, compared to 2013. These regions have also been home to some of the major deals of the last 12 months, with half of the top 10 largest deals being concluded in India (3) and China (2); the remaining five were concluded in North America.
Greater China welcomed much of the new capital flowing into the region, experiencing a 15% increase in deal volume and a 212% increase in aggregate deal value from 2013; deals in 2014 totalled USD12.8bn.
Predictably, North America remained the most prominent region for venture capital investment, with 4,594 venture capital financings in 2014 valued at a total of USD53.9bn, yet these deals accounted for the lowest annual proportion of overall deal number and value in the period 2007 to 2014. Europe saw an 18% reduction in the number of deals, from 1,729 in 2013 to 1,416 deals in 2014, however this was accompanied by a slight increase in aggregate deal value from USD9.1bn to USD9.2bn.
Although industry growth has mostly been centred in regions outside North America and Europe, the venture capital industry as a whole has witnessed a noticeable improvement in recent performance, with average venture capital fund returns in the year to June 2014 reaching 25.9%, higher than any other private equity fund type.
While North America maintains the top spot in terms of activity within the venture capital investment space, the talking point this year is certainly Asia. The region has seen significant growth in deal activity throughout 2014, particularly in terms of the amount of capital being invested in entrepreneurial companies. Across the globe, it is encouraging to see such a significant increase in the amount of capital being invested in young, innovative companies. With the performance of the asset class also improving for many recent fund vintages, many investors are looking to put more capital to work in venture capital funds. This is likely to encourage even greater levels of venture capital financing in the year to come.
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