San Diego, April 15, 2016 – Venture capitalists invested $253.5 million in 21 San Diego deals during the first quarter of 2016, according to the MoneyTreeTM Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Consistent with historical investment in San Diego, the life sciences industry (biotechnology and medical devices combined) was the top industry for venture capital investment in San Diego during Q1 2016, capturing $180.1 million, or 71 percent, of the total amount invested. The life sciences industry was propelled by a $75.0 million dollar investment in an early stage company, Acutus Medical, Inc. This is the third consecutive quarter in San Diego with a single company bringing in an investment in excess of $50.0 million.
The average deal size in San Diego for Q1 2016 was $12.1 million, a decrease from the average deal size in Q4 2015, when it was $13.5 million, as well as a significant decrease from Q1 2015, when the average deal size was $16.2 million. The prior year of 2015 included a megadeal ($149.4 million to Suja Life LLC in Q3 2015), as well as several deals in excess of $50.0 million, giving way to a larger average deal size than what has typically been seen in the past in San Diego.
Although overall venture capital investment dollars were down in Q1 2016 as compared to the prior quarter Q4 2015 and Q1 2015, $191.4 million of the total $253.5 million invested in San Diego during Q1 2016 was in early stage/seed companies. This is an increase compared to both Q4 2015 and Q1 2015, when investments in early stage/seed companies were $170.2 million and $184.3 million, respectively.
INDUSTRY ANALYSIS FOR SAN DIEGO
The top three industries in San Diego (in terms of dollars invested) for Q1 2016 were life sciences, software, and financial services, with $180.1 million, $35.9 million, and $30.0 million, respectively. Additionally, these industries represented 16 of the total 21 deals that took place in San Diego during Q1 2016. The financial services industry, which took in a total of $19.7 million on 4 deals across all of 2015 and 2014, had a single deal totaling $30.0 million take place during Q1 2016.
Of the $191.4 million which was invested in early stage/seed companies in San Diego during Q1 2016, six deals totaling $155.0 million were within the life sciences industry,
which is an increase of $14.8 million from prior quarter Q4 2015 and $88.3 million from Q1 2015. Within the software industry, $29.9 million of the $35.9 million invested during Q1 2016 related to expansion and later stage companies. The single deal within the financial services industry related to an early stage company.
INVESTMENT SEQUENCE
First, second, and third investment sequences for the first quarter of 2016 represented 62 percent of the deals, which was in line with Q4 2015, and the percentage of total dollars invested increased 14 percentage points from Q4 2015 to 54 percent in the current quarter. As compared to the same quarter of the prior year, first, second, and third investment sequence financings as a percentage of deals increased considerably, from 52 percent to 62 percent, and, as a percentage of dollars invested, these financings accounted for 16 percentage points more than what was reported in Q1 2015 (54 percent total in Q1 2016, 38 percent total in Q1 2015).
STAGE OF DEVELOPMENT
Seventy five percent of San Diego venture capital investment dollars went to start- up/seed and early stage companies in the first quarter of 2016, which represents a significant increase from Q4 2015, when start-up/seed and early stage investments represented 48 percent of investment dollars in the region. Total investment dollars for expansion and later stage companies decreased 66 percent from $181.9 million in Q4 2015 to $62.1 million in Q1 2016. As compared to Q1 2015, total dollars invested in expansion and later stage companies also decreased from $188.8 million to $62.1 million, or 67 percent. For Q1 2016, the largest average deal size went to early stage companies, at $19.1 million, which, as compared to the prior quarter, is an 18 percent increase, when the average deal size for early stage companies was $16.3 million. The second largest average deal size went to later stage companies, at $7.5 million, which is a large decrease as compared to the prior quarter, when it $18.9 million, making for a 60 percent decrease.
Nationally, 38 percent of venture capital investment dollars went to start-up/seed and early stage companies in Q1 2016, as compared to Q4 2015 when it was 47 percent. The average deal size for Q1 2016, as compared to Q4 2015, increased slightly to $9.9 million, from $9.7 million. The highest average deal size went to later stage companies, at $16.3 million.
Year over year, in terms of number of deals, 10 deals were made with start-up/seed and early stage companies in San Diego during Q1 2016, compared to 13 deals in Q4 2015. Nationally, 468 deals were made in Q1 2016 compared to 579 deals in Q4 2015. In San Diego, the dollar amount invested in start-up/seed and early stage companies increased as compared to both Q4 2015 and Q1 2015, increasing $21.2 million from Q4 2015, to $191.4 million, and increasing $7.1 million from Q1 2015. On a national scale, the dollar amount invested in start-up/seed and early stage companies decreased from $5.6 billion in Q4 2015 to $4.6 billion in Q1 2016, but increased from Q1 2015 when that amount was $3.9 billion.
Note to the Editor
Information included in this release or related venture capital investment data should be cited in the following way: “The MoneyTreeTM Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Financial”, or “PwC/NVCA MoneyTreeTM Report based on data from Thomson Financial.” After the first reference, subsequent references may refer to PwC/NVCA MoneyTree Report, PwC/NVCA or MoneyTree Report. Charts and tables displaying the data are sourced to “PricewaterhouseCoopers/National Venture Capital Association MoneyTreeTM Report,
About the PricewaterhouseCoopers/National Venture Capital Association MoneyTreeTM Report
The MoneyTreeTM Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. It is based on data provided by Thomson Reuters. The survey includes the investment activity of professional venture capital firms with or without a U.S. office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments, in a qualified and verified financing round the entire amount of the round is included. Qualifying transactions include cash investments by these entities either directly or by participation in various forms of private placement. All recipient companies are private, and may have been newly-created or spun-out of existing companies.
The survey excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as roll-ups, change of ownership, and other forms of private equity that do not involve cash such as services-in-kind and venture leasing.
Investee companies must be domiciled in one of the 50 U.S. states or DC even if substantial portions of their activities are outside the United States.
Data is primarily obtained from a quarterly survey of venture capital practitioners conducted by Thomson Reuters. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies. Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.
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