FOR IMMEDIATE RELEASE For more information: Adam Wade Dow Jones Financial Information Services (415) 439-6666 adam.wade@dowjones.com AFTER NEARLY 3 YEARS OF STEADY GROWTH, U.S. VENTURE INVESTMENT PULLS BACK 7% IN 1 ST QUARTER TO $6.84 BILLION Dow Jones VentureSource Finds Fewest Deals Since 2005; Funding for Health Care Companies Falls While Info Services Companies Raise a Record $1.59 Billion SAN FRANCISCO and NEW YORK (April 19, 2008) Venture capital investment in U.S. companies slipped 7% in the first quarter of 2008 compared to the same period last year to $6.84 billion, according to the Quarterly Venture Capital Report released today by Dow Jones VentureSource (www.fis.dowjones.com), the venture industry s premier data provider. The report showed that deal count reached 603 deals for the quarter, down by 25 deals from the first quarter last year and the lowest quarterly total since the first quarter of 2005. Despite showing the first down quarter in nearly three years, the report gives no indication that momentum within the venture capital market is slowing due to the slumping economy. While we are watching closely to see if the slowdown in the overall economy will infect the venture capital community, it s simply too early to know for sure, said Jessica Canning, Director of Global Research for Dow Jones VentureSource. The venture industry is usually insulated from the immediate effects of an economic downturn. The first quarter may have been a down quarter compared to last year, but $6.84 billion still represents a very healthy amount of investment and there are some encouraging signs in areas like IT, energy, and business, consumer and retail.
Notable trends in the first quarter include a significant jump in deal activity and investment in the information services sector, which includes the majority of today s Webrelated companies, as well as a dramatic dip in life sciences investing. In particular, the information service sector saw a record $1.59 billion invested in 170 deals, an increase of 104% over amounts invested during the same time in 2007. Life Sciences Lag Brings Down Overall Numbers According to the data, health care was the only industry to record an overall decline in investment during the first quarter of 2008 with $1.74 billion invested in 142 deals. This is 43% less than the $3.06 billion invested in 175 deals during the first quarter last year. The majority of the industry s investment decline was contained in the biopharmaceuticals sector, which saw just 59 deals completed and $771 million invested in the quarter, a 59% drop-off from the $1.89 billion invested last year. Similarly, the medical devices sector recorded a 15% decline in investments compared to a year ago with $866 million put into 67 deals. The health care industry may be the first to show signs that the broader public markets may be affecting venture investment, as IPOs are normally the preferred exit for venture-backed biotech companies, said Ms. Canning. However, health care is a highly cyclical market and our analysis shows that the current drop in biotech funding is not due to an overall pullback but is more a result of there simply being fewer large-sized deals. In fact, of the top 20 deals in the first quarter, only two were health care deals. Over the last couple of years, health care has accounted for closer to half of the top deals each quarter. The largest health care deal of the quarter belonged to TriVascular2 of Santa Clara, Calif., which raised a $65 million first round to fund development of a device to treat abdominal aortic aneurysms.
The report showed that the information technology (IT) industry recorded a strong quarter with $3.88 billion invested in 373 deals, up 20% over the $3.24 billion put into 358 deals in the first quarter last year. For the first time on record, the software sector did not account for the most IT investment as it trailed behind information services. According to the data, software posted a small 1% gain over the previous first quarter with $1.22 billion invested in 131 deals. Highwinds Network Group of Winter Park. Fla., a provider of IP services and content distribution platforms, closed one of the largest IT deals of the quarter with a $55 million first round. The business/consumer/retail industry saw a 29% increase in investment as venture capitalists put $677 million into 54 deals during the first quarter, according to the report. Most notable were the 10 deals in the Web-heavy media/content/info sector, which attracted a record $236 million in investments, more than what was put in this area in all of 2007. The largest deal for the business/consumer/retail industry belonged to Brisbane, Calif.-based Glam Media, which raised over $64 million for its women s fashion Web site. Companies developing clean technologies continue to attract steady interest from investors, the report showed. Although cleantech cuts across all industries, the majority of these companies can be found in the energy, agriculture, and advanced specialty chemicals and materials segments. In total, companies in these sectors accounted for 34 deals and nearly $532 million worth of investment in the first quarter, which is on par with levels recorded over the same period last year. The energy sector saw the bulk of investment with $368 million put into 22 deals during the first quarter. Later-Stage Financings Increase; Deal Sizes Hold Steady
The quarterly report also identified the continuation of a recent trend growing investment in later-stage companies. Later-stage rounds accounted for 39% of all venture financings in the first quarter of 2008, up from 32% in the same quarter last year. By comparison, the proportion of seed and first rounds fell from 42% in the first quarter of 2007 to 35% in the most recent quarter. Second rounds held steady at roughly 22% of the deal total. According to the data, the median deal size reached $7.1 million in the first quarter, up from $7 million in the first quarter of 2007 but below last year s record annual median of $7.5 million. By industry, healthcare financings had the largest medians at $9.3 million, followed by business, consumer and retail at $8.75 million and IT financings at $6.5 million. Regional Perspectives California once again dominated the venture capital activity in the first quarter, representing 46% of the nation s deal flow and 47% of the capital invested. The report showed that by major regions: The San Francisco Bay Area remained a venture capital stronghold as investment climbed 10% with $2.56 billion invested in 213 deals. After falling behind New England in the fourth quarter of 2007, Southern California reclaimed the position of the second leading investment region with $672 million invested in 63 deals. However, this is nearly 42% below the $1.17 billion invested over the same period last year. The New York Metro region attracted $602 million in 52 completed deals. That is more than double the $256 million invested the first quarter of 2007. New England was the fourth most-active investment region as investment fell 40% in the first quarter with $577 million put into 72 deals.
Investment in the Pacific Northwest fell 37% compared to a year ago with $249 million invested in 23deals. Texas posted a 27% gain over the first quarter of 2007 with $325 million invested in 24 deals. Investment in the Potomac region nearly doubled from $122 million in the first quarter of 2007 to $241 million this year while deal activity remained steady with 17 financing rounds completed. Capital investment in the Research Triangle region was virtually nonexistent with just $19 million invested in four deals. For more information or to arrange a personal demonstration of Dow Jones VentureSource, visit www.fis.dowjones.com or call 866-291-1800. # # # The investment figures included in this release are based on aggregate findings of Dow Jones proprietary U.S. research and are contained in VentureSource. This data was collected by surveying professional venture capital firms, through in-depth interviews with company CEOs and CFOs, and from secondary sources. These venture capital statistics are for equity investments into early stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice. Copyright 2008 ABOUT DOW JONES PRIVATE MARKETS Dow Jones Private Markets (www.fis.dowjones.com) is part of Financial Information Services, a division of Dow Jones & Co., a News Corporation company. Dow Jones Private Markets offers integrated content solutions for the deal-sourcing, due diligence and compliance needs of today s venture capital and private equity investors, fund managers, advisors, and portfolio companies. Core products include the industryspecific deal databases Private Equity Source and VentureSource, as well as the highly-respected publications Private Equity Analyst, VentureWire and LBO Wire. ABOUT DOW JONES Dow Jones & Company (www.dowjones.com) is a subsidiary of News Corporation (NYSE: NWS, NWS.A; ASX: NWS, NWSLV; www.newscorp.com). Dow Jones is a leading provider of global business news and information services. Its Consumer Media Group publishes The Wall Street Journal, Barron's, MarketWatch and the Far Eastern Economic Review. Its Enterprise Media Group includes Dow Jones Newswires, Factiva, Dow Jones Client Solutions, Dow Jones Indexes and Dow Jones Financial Information Services. Its Local Media Group operates community-based information franchises. Dow Jones owns 50% of SmartMoney and 33% of Stoxx Ltd. and provides news content radio stations in the U.S.