2015 Strong Year For Venture Funding; Mega-Deals Dominate

2015 was strong for venture capital with the dollars invested in companies up both nationally and in the DC region. The mega-deals, those over $100M, also dominated. Will the momentum continue in 2016 even though venture funding takes a beating during election years?

Dollars going to DC-area companies increased 30% from $1.1B in 2014 to $1.4B last year, according to the MoneyTree report released today by PricewaterhouseCoopers and the National Venture Capital Association. The average deal size was also up 51%, shooting to $8.4M from $5.5M. Money going into software and biotech continued to dominate, but 2015 was a little more diverse from the previous year with $40M going into business products and services, electronics and financial services. “None of those categories received money in this market in 2014, which is significant,” says PwC emerging company services director Brad Phillips (above).

One of the biggest DC-area deals in the year was the $250M Series B round raised by Baltimore-based Tenable Network Security in November. (Tenable CEO Ron Gula above.) It helped drive up the year for the DC region, but Brad points out 2015 would still have been up 6.5% over 2014 without that deal. The Tenable deal certainly helped Maryland land over 81% of the VC dollars in the region during Q4 of last year. “It’s rare for Maryland to take that much of the total in any given quarter,” Brad adds. 

Nationally, 2015 was the highest year on record for investments since the MoneyTree’s debut in 1995. Companies raised $58.8B in 4,380 deals. The number of deals was the second highest since ’95, with 2000 still ranking higher. Software still dominates, with life sciences following close behind. Other industries that took venture cash include fintech, healthcare, and consumer products and services. Medical devices was flat. 

The mega-deal theme dominated the year, with 74 deals valued at over $100M, compared to 50 in 2014. There were three $1B rounds during 2015, compared to two in 2014. “Looking at the largest deals since ’95, 17 of the top 20 deals have been done in the last two years,” adds Brad. 

So what about 2016? Brad predicts the size of VC investments will normalize over the course of the year, so there will be fewer mega-deals. “Sustaining that mega-deal momentum is not realistic,” he adds. But he expects to see consistent, more sustainable investment activity for the local ecosystem going forward. 

But will the election year slow down the momentum? It sure did during the last two election years. In 2012, venture funding for the year was at $753M, down from $1B the previous year. Venture funding picked back up the next year, in 2013, to $1.6B. In 2008, when President Obama was first elected, companies raised $1.2B in venture funding, down from the $1.4B raised the previous year. However, the DC region’s venture funding didn’t make a comeback in 2009, which was the height of the financial crisis. It dropped dramatically to $684.7M.