The venture capital investment numbers are out for the Q2 2012 (courtesy of NVCA & PwC). Last quarter, I pondered what the quarterly numbers mean relative to annual figures and I wanted to provide an update. I aim to post again about why I think the focus on these numbers distract from a more important issue: understanding how and why money is flowing so that we can adapt our existing and develop new business models. In the meantime, here are a couple of related things I’ve been reading:
- Luke Timmerman at Xconomy did a nice overview of the Silicon Valley Bank analysis of life science exits by Jonathan Norris. The numbers support optimism about exits but as a few of us discussed on Twitter, the dollars invested have to be considered to understand what value was captured at exit.
- Michael Greeley, general partner at Flybridge Capital Partners, is concerned about the other end of the VC equation – fundraising by VCs. One of the topics he mentions is the concentration of VC dollars at fewer firms, which perhaps strikes me differently since I’m based in Wisconsin where dependence on traditional VC has rarely been a viable strategy.
Let’s get back to the numbers for VC as a whole as well as the biotech investment breakouts. The first graph in each category is all historical data. The next two graphs (side by side) are 2002 to Q2 2012 vs. 2007 to Q2 2012. For the five year overview, I included the annual totals on the graph for reference. At first glance, the overall VC investment numbers look as though the year may not be that far off from recent years. For biotech, the data suggests that while 2002 investment levels may be achievable but there is a lot of ground to cover to avoid 2012 being the valley of the last five years.
Using the same approach as above, here is the Wisconsin data. After the last quarter when Wisconsin brought in just $5M in VC investment, this quarter saw a jump to $29.7M. When factored in, the WI data since 2002 continues support high variability: any given quarter is almost equally likely to be <$5M as over $20M (13 quarters <$5M, 12 quarters >$20M).