Austin Dips in VC Investments for Second Quarter But Still Strong for 2015

By LAURA LOREK
Reporter with Silicon Hills News

Photo licensed from IStockphoto

Photo licensed from IStockphoto

The amount of venture capital bucks invested in Austin dropped nearly 49 percent in the second quarter to $162.5 million, compared to the first quarter’s $267.2 million, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thompson Reuters.

But that doesn’t mean Austin’s entrepreneurial activity is slowing down, said Eric Hornsten, managing partner of PricewaterhouseCoopers’ Austin office.

“The first quarter of 2015 was really a blowout quarter for Austin, Metro,” Hornsten said. “The second quarter is still a very positive quarter.”

Overall, for the first six months of 2015, Austin’s total venture capital dollars invested is actually up nearly 16 percent to $430 million, compared to $367 million for the first half of 2014, Hornsten said.

“It’s a very positive first half for VC investing in Austin,” Hornsten said. “What you see is a pretty steady increase in venture capital investment in Austin over the last few years.”

Austin had 27 funding deals in the second quarter, compared to 30 funding deals in the first quarter, according to the MoneyTree Report.

The money came from local, state and national sources. The most active investors in the second quarter were Silverton Partners of Austin, New Enterprise Associates of Menlo Park, Calif. and Capital Factory, all with three deals. Osage Partners of Pennsylvania, LiveOak Venture Partners of Austin, Correlations Ventures of San Diego, Sante Ventures of Austin and Mercury Partners Management of Houston all had two deals each during the second quarter, according to the report.

In the largest deal for the quarter, the report showed Mirna Therapeutics, a clinical stage biopharmaceutical company, received $41.8 million, followed by ATX Innovation, a mobile payment app doing business as TabbedOut, with $21.5 million and Illumitex Inc., LED lights, with $15.2 million, all based in Austin.

“One trend that I would observe, particularly if you look at the first quarter and second quarter of 2015, is the increase in biotechnology deals,” Hornsten said. “If you went back fives years, you wouldn’t see a lot of biotechnology investment in Austin.”

The data shows venture capital investment in the biotechnology area in 2011 totaled just $25 million and last year it was $41 million, compared to $101 million in the first half of 2015, Hornsten said.

Austin still leads the state in the amount of venture capital invested in the first half of 2015 with $430 million, followed by Dallas with $132 million, Houston with $69 million and San Antonio with $35 million, according to the MoneyTree Report.

The Austin and Texas’ venture capital investment trends are also consistent with national trends, Hornsten said.

With the national data, the second quarter is the largest quarter since 2000 with $17.5 billion of venture capital invested in 1,189 deals in the second quarter of 2015, according to the MoneyTree Report. That’s up 30 percent in dollars and 13 percent in the number of deals compared to the first quarter.

And the second quarter is the sixth consecutive quarter of more than $10 billion of venture capital invested in a single quarter.

The software industry attracted the most investment dollars nationally. The quarter had 26 deals with more than $100 million invested and another $1 billion investment, according to the MoneyTree Report.

“Driven by a strengthening fundraising environment, the venture ecosystem deployed more capital to the innovation economy in the second quarter than any period in the last fifteen years. While this uptick can be partly attributed to non-traditional investors joining funding rounds, venture continues to lead the way in deploying capital to the most promising new technologies and companies,” Bobby Franklin, President and CEO of NVCA, said in a news release. “With software companies continuing to disrupt entrenched industries and in some cases creating new industries all together, venture investment into the sector increased 30 percent from the first quarter to $7.3 billion, marking the highest total investment into software companies since the inception of the MoneyTree Report in 1995. As valuations increase and more and more companies choose to stay private longer, we are likely to see software’s share of total venture investment continue to rise.”

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