By Russ Garland
Powered by giant funding rounds for tech companies such as Uber
Technologies Inc., U.S. venture-capital investment jumped 47% in
2014, as investment in later-stage deals hit an all-time high.
Investors including corporations, hedge funds and mutual funds,
as well as private-equity and venture firms, poured $52.12 billion
into private companies last year. Of that total $31.35 billion went
to finance mature businesses that would have been considered ripe
for an initial public offering by the standards of 15 years
ago.
Late-stage investment surpassed the $28.45 billion that went
into later rounds in 2000, during the dot-com bubble, according to
industry tracker Dow Jones VentureSource. Overall venture
investment remained well shy of the record $94.17 billion invested
in 2000.
What was different then was that investors pumped money into
first and second rounds of fundraising, as well as later rounds, as
newly minted startups leapt into public markets with unproven
business models.
The more-mature companies that dominated 2014's venture-capital
investment, such as car-hailing service Uber, database-software
company Cloudera Inc. and room-rental website Airbnb Inc., had
spent years building businesses and had received several rounds of
venture funding.
In the past, including during the Internet bubble, such
companies already would have gone public, said Sandy Miller, a
general partner at later-stage investor Institutional Venture
Partners and a former investment banker. Instead, they are staying
private, finding ample opportunity to raise capital for growth.
"The quality and scale of the companies is a night-and-day
difference," Mr. Miller said.
Many fast-growing companies have turned away from the public
markets. The 105 IPOs by venture-backed companies in 2014 were the
most since 2000, but they were still just half of that year's total
of 210. The year before, in 1999, there were 256 venture-backed
IPOs.
In October, The Wall Street Journal reported that at least 49
venture-capital-backed companies in the U.S. had a valuation of $1
billion or more--a milestone marking them as IPO candidates--yet
they remained private. That topped the previous peak of 28 such
billion-dollar companies at the end of 2013 and substantially
exceeded the 10 such companies that were still private in 2000.
Uber, which does business world-wide, was the fundraising
heavyweight last year, raising two separate $1.2 billion rounds of
later-stage financing. Investors included sovereign-wealth fund
Qatar Investment Authority, mutual fund manager Fidelity
Investments and BlackRock Private Equity Partners.
Cloudera, which raised the most after Uber, collected $740
million from an investment by Intel Corp. The Cloudera and Uber
financings were among the 22 financings of $200 million or more in
2014, which accounted for $8.57 billion of the investment
total.
While the amount invested shot up last year, the number of deals
fell, underscoring the outsize role played by a relatively few very
large financing rounds. There were 3,682 financings for U.S.
venture-backed companies in 2014 versus 3,837 in 2013, according to
VentureSource.
Financings ranging into the hundreds of millions were the
province of a select group of companies. The median later-stage
financing last year was $13 million, up from $10 million a year
earlier but easily below the $20 million median investment in
2000.
The hot market is driving up valuations, however. The median
valuation for all venture financings last year was $40 million, up
from $20 million in 2013 and higher than the $25 million for 2000,
according to VentureSource. Uber's latest round of funding, in
December, pushed its valuation to $41 billion, the highest for any
company currently backed by venture capitalists.
Write to Russ Garland at russell.garland@wsj.com
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