A win for DFJ Esprit today, the European partner of Silicon Valley-based venture capital firm Draper Fisher Jurvetson, following the news of a successful acquisition of its portfolio company Redkite Financial Markets by NASDAQ-traded NICE Systems. DFJ Esprit only invested in Redkite in July 2011. Redkite has a real-time software solution for financial market surveillance. DFJ put in $1.14 million into the company but the terms of the sale have not been disclosed. Redkite equips financial institutions with tools to monitor, analyse and act on trading conditions in real-time. This helps detect suspicious transactions and trading behaviour and ultimately identify rogue trading. As you can imagine, it’s the kind of thing that has been pretty hot of late.

The US/Israel-based NICE Systems is continuing an acquisition run from last year after is acquired Fizzback for $80 million, amongst others.

To re-cap, DFJ Esprit has had sixteen exits since January 2010 totaling over $2.1 billion, including the sales of LOVEFiLM, Icera, The Cloud, Kiala, EVE and Zeus among others. According to the company this represents 33% of all European Venture-backed M&A exits during that period, which total $6.5bn according to Dow Jones VentureSource (applying to exits over $40m/£25m).

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Dow Jones VentureSource has released some figures about European venture capital which we should all take a look at and chew over. The headline news is something that you might not have predicted a few years ago. Given that bigger European tech companies have been largely drawn from the Enterpise/B2B space, it’s significant that consumer Internet companies are now leading the charge. But the trends also show that European tech companies are suffering from too few exit opportunities which is leading to later-stage financing rounds and less deal activity.

According to VentureSource, venture-backed companies based in Europe raised €1.3 billion through 273 venture capital deals during the second quarter of 2012. This represents a 14% increase in capital raised. But at the same time there has been a 20% decline in deals from the same period last year.

Consumer technology services saw the greatest gains of any industry in the second quarter, raising €493 million through 72 deals. This was more than double the €239 million raised during the same period last year “despite only one more deal being completed”. Almost two-thirds of the capital went to the “consumer information services” sector, which includes social media, online entertainment and search companies.

In addition, 62% of deals in the second quarter went to early-stage companies, up from 58% in the same period last year. Early-stage companies also accounted for 32% of capital invested, on par with the second quarter of 2011. Second-round deals accounted for 19% of deal flow and 18% of capital invested, down from 25% and 28%, respectively, in the year-ago period. Later-stage deals accounted for 19% of deals, up from 17% a year earlier, and 49% of capital invested, a significant increase from the year-ago period when 39% of capital went to later-stage companies.

Also in the report:

• During the second quarter, 38 European venture-backed companies were acquired, a 34% drop in deals from the same period last year, and three companies went public, which was half the number of initial public offerings (IPOs) recorded in the second quarter of 2011.

• Through the first six months of this year, venture capital investment totaled €2.2 billion for 550 deals, a 7% decline in capital and 10% decline in deals from the year-ago period.

• The industry trends in the second quarter largely reflect the recently released U.S. investment figures, with Internet and software companies faring well but significant declines recorded in the healthcare and energy industries.

The “data” market is also buoyant. Business and financial services companies raised €144 million for 35 deals during the second quarter, a 58% increase in investment despite a 27% decline in deals. The business support services sector, driven by interest in marketing, advertising and data management companies, raised €108 million through 26 deals during the second quarter, double the amount invested in the same period last year despite a 28% drop in deal flow.

The “IT” industry – or traditional software – raised €215 million for 73 deals during the second quarter, an 18% decline in investment and a 17% drop in deal activity compared with the same period last year. The software sector – traditionally the most popular investment area in IT – fared well, raising €136 million through 54 deals, a 24% increase in investment despite an 8% drop in deals. This shows that traditional enterprise software is not quite dead in the age of the Cloud, although the drop in deal activity is telling.

Significantly, Anne Malterre, European research manager, Dow Jones VentureSource puts the lack of deal activity combined with investment growth down to a “lacklustre exit environment” keeping companies private for longer. The larger financing rounds come from companies need to grow, thus boosting the amount invested.

However, the data shows what we’ve been observing on the ground: VCs increased the percentage of deals done for early-stage companies and their “interest in online start-ups remained strong.”

So something has to give, somehow, at some point in terms of deal flow. Quite what that is remains to seen, but the likelihood is that this year marks the end of the recent cycle and the beginning of a new one where companies wait things out until the next round of exit opportunities present themselves. Just two examples of the end of the cycle are the recent exits of Playfire and Moonfruit. There will be others.

The full Dow Jones information is here.

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Whether it’s revenue, users, funding, whatever — nowadays in tech, it seems like the numbers just keep getting bigger.

The latest example of this: New Enterprise Associates, the global venture capital firm with headquarters in Silicon Valley, is in the process of raising $2.56 billion for its 14th fund, “NEA 14,” according to regulatory documents filed today with the Securities and Exchange Commission. NEA has already closed on nearly $2.1 billion for the fund, and $487 million of the offering remains to be sold, the filing said.

If NEA closes on the full amount, it will have raised one of the largest — if not the largest — venture capital funds in history. As of now that title goes to Oak Investment Partners, which raised $2.56 million in its twelfth fund back in 2006.

Documents about the NEA 14 fund were first filed in March; at that time, however, the maximum offering amount was slated at $2.3 billion. The Wall Street Journal is reporting that the size increase to $2.56 billion was due to “strong investor demand” — which seems pretty apparent. Fortune is reporting that NEA 14 will likely close in July, citing sources close to the situation. I’ve reached out for more comment from NEA, but with all the regulations around what firms can say while they’re still in the middle of a fundraising process, they’re understandably being a bit tight-lipped.

This is some big money, but it’s not out of character for the 34-year-old NEA. For its previous fund, NEA 13, which was raised back in 2009, the firm closed on $2.45 billion.

It all plays into a larger trend in venture capital, where the total number of firms in the game are shrinking but the ones on top are getting bigger and more powerful than ever. In a report about the VC industry released last month, Dow Jones VentureWire editor Zoran Basich put it like this: “A few big firms continue to have no trouble raising large funds, as limited partners are sticking with what they see as safe bets when making their venture allocations.” According to a report released recently by the National Venture Capital Association, the top five VC funds accounted for nearly 75 percent of total fundraising during the first quarter of 2012, while the amount of funds raising money fell to the lowest levels seen in more than two years.

Article courtesy of TechCrunch

It looks like IPOs were up significantly in the first quarter of this year, while M&A dipped for venture-backed companies. Dow Jones VentureSource is releasing a new report this morning indicating that Q1 2012 was the most active quarter for IPOs since the fourth quarter of 2007 and the most active first quarter since 2000. Twenty companies went public in the first quarter, including Yelp, Millennial Media, Brightcove and others. Ninety-four companies were acquired during the same period, which marks the second-straight quarter of declining deal volume for M&A according to Dow Jones VentureSource.

Twenty companies raised $1.4 billion through public offerings in the first quarter, which is up from the 11 IPOs that raised $768 million during the first quarter of last year. Currently, 50 U.S. venture-backed companies are in IPO registration. Thirteen of those companies filed during the first quarter.

“Big exits by Groupon and Zynga dominated the end of 2011, but small- and mid-cap IPOs have taken center stage so far this year,” said Zoran Basich, editor of Dow Jones VentureWire. “The public markets proved receptive to a broad range of companies, which is a positive sign for the industry.”.

It took companies a median of $68 million and 7.7 years to reach an IPO, which is a 22% drop in capital raised but an increase in time from 6.2 years during the same period a year ago.

Dow Jones says that 94 mergers, acquisitions and buyouts raised $18.1 billion in the first quarter, which is a 32% decrease in deals and 42% increase in capital raised from the same period last year. The median price paid for a company spiked to $190 million from $43 million in the first quarter of last year.

Major deals included Zynga-OMGPOP, Adobe-Efficient Frontier and Cisco Systems-Lightwire.

Google, which was the most active acquirer of venture-backed companies in 2011 with 12 acquisitions, did not buy any companies in the first quarter of 2012. Groupon has been on a buying spree, acquiring six venture companies in the first quarter, which is double the three acquisitions the company made throughout 2011.

To reach an M&A or buyout, companies raised a median of $13 million in venture financing, 13% less than in the first quarter of 2011, and took a median of 4.9 years to build their company, slightly more time than the 4.6-year median a year earlier.

Disclosure: My husband is an employee of Groupon.

Article courtesy of TechCrunch

According to a Dow Jones VentureSource report released this morning, fewer US-based venture-backed companies exited in 2011 than the year before, but the deals netted more capital as the median price for M&A and buyouts, as well the median amount raised in initial public offerings, spiked.

Dow Jones VentureSource says there were 522 exits of venture-backed companies in the US throughout 2011, which represents a significant 4 percent drop in deal activity compared to 2010.

However, the capital netted from those exits increased an impressive 26 percent in 2011, compared to the year before.

Notably, for the first time in five years, acquisition activity in the fourth quarter of 2011 did not outpace the third quarter. In fact, Q4 2011 was apparently the least active quarter of the year.

Says Jessica Canning, global research director for Dow Jones VentureSource:

“Despite a slower acquisition pace capped with an uncharacteristic drop in deal activity in the fourth quarter, there are some positive signs heading into the new year. Acquisitions of companies liquidating their assets were halved in 2011 and companies are benefiting from lower start-up costs by taking capital farther toward a larger acquisition.”

According to Dow Jones VentureSource data, the median price that was paid for a company increased 77 percent (to $71 million) in 2011.

To reach an M&A or buyout, companies raised a median of $17 million in venture financing, 12 percent less than in 2010, and took a median of 5.3 years to build their company.

In 2011, 45 companies raised $5.4 billion by going public, significantly more than the $3.3 billion raised by 46 IPOs in 2010. A lot of that comes from the IPOs of tech giants Groupon and Zynga, which combined raised $1.7 billion by hitting the public markets.

Other notable tech IPOs included LinkedIn, Pandora, Yandex, Tudou and Renren.

And now, all eyes on Facebook.

The median amount of venture capital raised prior to an IPO rose 17 percent (to $85 million) in 2011.

The median amount of time it took a company to reach liquidity fell to 6.5 years, from 8.1 years in 2010. In other words, companies seem to be needing more capital but less time to get from founding to IPO in this day and age.

Also read:

Late-Stage Web Companies Took In The Largest Tech Investments Of 2011

2011: The Year In Tech

Article courtesy of TechCrunch

Venture capital firms put more money into US startups at higher valuations in the third quarter of this year versus the second, according to a new report out today by law firm Fenwick & West, with Internet and software firms accounting for some of the biggest gains.

But the overall venture environment is looking “schizophrenic,” Fenwick partner and report co-author Barry Kramer tells me today. “The amount of money invested by VCs continues to be more than the money they raise, and that’s not healthy or sustainable for an extended period.”

Despite venture firm fears, including uncertainty about effects from Europe’s financial issues and US government intervention in the economy, up rounds — where a company’s valuation was higher than the previous round — accounted for 70% of all fundings in the quarter. Only 15% of fundings were down from previous rounds, with 15% flat. In contrast, Fenwick had previously found that only 61% of rounds were up in the second quarter, with 25% down.

Splitting up the quarters also obscures the relatively slow funding process, Kramer notes. Fundings can take months to get finalized, and some of the upward changes last quarter could have been due to decisions made in the second quarter.

Still, it’s particularly striking that relatively early companies — those raising their second venture rounds — had the highest proportion of gains, with 89% up of their rounds going up. Venture firms typically invest with the intention of getting liquidity in three to five years. The fact that that they’re putting the money that they have into companies now shows they think their investments are going to make them money down the road despite all the fears.

There’s a big caveat here, though. Kramer says that one company, which he isn’t disclosing, had a 1500% up round, and if it were excluded from the data, up rounds would have only been 54% of the total. Readers, tell us in the comments if you know who this mystery company is.

Fenwick, which pulls a variety of other sources in addition to its own research, cites recent DowJones VentureSource data showing that traditional venture firms as well as corporate investing arms put a total of $8.4 billion into 765 deals in the U.S. over the quarter, which is up 5% from the $8.0 billion invested in 776 deals that it reported for the second quarter.

All this funding is coming in spite of larger concerns about the world economy and the opportunity for startups in it. “Valuations are continuing to increase while VCs are professing reduced confidence in the future,” Kramer observes. The report references the Silicon Valley Venture Capitalist Confidence Index, produced by Professor Mark Cannice at the University of San Francisco, which indicated a drop in Silicon Valley investor confidence. VCs in aggregate reported a 3.41 confidence level on a 5 point scale last quarter, down from 3.66 in the second quarter.

Finally, it’s worth noting that there’s a mix of results coming on how the quarter went. For example, the DowJones VentureSource data doesn’t fit with follow an earlier report put together by MoneyTree, Pricewaterhouse Coopers and the National Venture Capital Association. That one had shown VCs investing $6.9 billion across 876 deals, down from the $7.9 billion invested in 1,015 deals in the second quarter.

The numerical discrepancies between the reports are partially due to methodology differences, like whether a company is in Internet or software, or whether an international firm gets only its US investing activity counted. The more important point here is the trends that each show, Kramer says — and the relatively high investments in the face of larger economic fears and liquidity questions is what’s odd.

You can find the full report here.

Article courtesy of TechCrunch

As is abundantly clear from all the entrepreneurial activity on display at TechCrunch Disrupt Beijing, China is growing as a startup center.  In the third quarter of 2011, $1.3 billion in venture capital poured into China, up 84 percent, according to Dow Jones VentureSource.

At the same time, VC dollars slid 12 percent in Europe to almost exactly the same amount: 951 million Euros or $1.3 billion.  (For comparison, U.S. VC dollars rose 29 percent to $8.4 billion in the third quarter).   Are we at a crossroads where more venture capital will end up in China than in Europe?

One quarter’s data is not enough to draw any conclusions, but if this pattern continues we could see China supplant Europe in terms of total capital available to startups.    The median deal size is already bigger: $11.7 million in China versus $2.8 million in Europe.  VentureSource tracked 89 deals in China last quarter, and 219 in Europe.

In terms of potential exits, China is still booming as well,  There were 29 Chinese startups which IPOed last quarter, raising a total of $4.4 billion

Article courtesy of TechCrunch

There is a lot of hype swirling that 2011 is going to be the big comeback year for the venture-backed IPO. And we’re talking about big, gaudy IPOs, not small ones that essentially function as another funding round. And interestingly, pundits and investors expect some new $1 billion companies to debut in both cleantech and Internet sectors.

So maybe the fourth quarter was just the calm before the frenzy? Let’s hope so, because it wasn’t great, according to Dow Jones VentureSource’s quarterly liquidity report issued this morning.

Overall in 2010, the number of exits increased 25% from 2009, but considering the economic state the world was in two years ago, that’s not saying a lot. In all 514 companies went public or got acquired in 2010, netting some $39.3 billion in capital. Those totals still fell short of the 613 companies that exited 2007– the last decent year on record.

Most of 2010′s gains over 2009 happened in the first nine months of the year. In the fourth quarter specifically, 126 acquisitions and IPOs netted just under $12 billion, a small increase over the year earlier period when 123 exits netted $11 billion. Acquisitions actually fell 7% in the fourth quarter of 2010 over the fourth quarter of 2009.

But at least on a year-over-year basis the exits are getting a lot bigger. In 2010 companies returned 72% more money than the companies that exited in 2009, although at just south of $40 billion it’s about 40% less than the $69.1 billion returned to investors in 2007.

What accounts for the dramatic increase in money while the number of deals was just up 25%? The relative return of the IPO. I say “relative” because we’re still not talking about good numbers given the amount invested each quarter in new companies and the paltry track record of IPOs for most of the last decade. But for the first time since 2007, the number of IPOs actually hit double digits. Forty-six venture funded companies went public in 2010, raising $3.4 billion– up more than five times from the year earlier’s proceeds from a paltry eight IPOs. And there are 44 companies in registration, up from 25 this time last year, says Jessica Canning, director of global research for Dow Jones VentureSource.

Although most startups will exit via acquisition, IPOs are crucial. Without them, the venture-backed ecosystem doesn’t get the next generation of tech giants to do future acquisitions, and the threat of an IPO drives up the acquisition prices.

But here’s an important thing to consider amid the inevitable “HAPPY DAYS ARE HERE AGAIN!” some VCs will be spinning once these numbers are released: Despite the surge of super angels and widespread belief that it takes less money and less time to build a company today, companies are taking more money and longer to go public than ever before.

According to Dow Jones, the medium amount of venture capital raised prior to an IPO rose 60% to $69 million in 2010 and the median amount of time it took a company to go public rose to more than eight years. The time to exit has been steadily marching up year-after-year, which is a combination of the economy, post-2000 changes on Wall Street, and founders’ reluctance to file. The venture-backed economy is rapidly becoming polarized between quick flips or a long, hard-fought slogs even for the hottest companies.

Even if the wildest hopes for 2011 IPOs turn out to be true, those two metrics will no doubt increase with some of the biggest contenders being decade-old startups like LinkedIn and Pandora and companies that have raised un-Godly amounts of funding like Groupon, Facebook and Zynga. It’s like David Hornik argued in our VC v. Angel smackdown last fall: Building a product is easier and cheaper than ever but building big Internet companies still takes time and a “shit-load of money.”

One final note as a hat-tip to Benchmark’s Bill Gurley: The Valley may be the biggest ecosystem, but the biggest deals still didn’t come out of Silicon Valley. The largest IPO of the year was a $211 million offering by New York-based FXCM, a foreign exchange trading firm, and the largest acquisition was a $1.2 billion purchase of Dallas-based Monitronics International, which makes security systems.

Article courtesy of TechCrunch

Domestic venture capital funding of cleantech businesses fell 55% to $575.6 million in the third quarter of 2010 compared to the same period last year according to a new report from Ernst & Young and Dow Jones VentureSource. The energy efficiency segment, however, beat the downward trend.

The largest deal of the entire quarter was a $65 million third-round later stage deal closed by Solaria Corp., a Fremont, CA developer of silicon photovoltaics and high-efficiency solar panels.

Including “energy efficiency products, power and efficiency management services or industrial products,” the energy efficiency segment saw 17 deals raising a total of $161.7 million in venture capital funds, representing an increase of 6% by dollars, and 21% by number of deals, year-over-year in Q3.

Smooth-Stone— an Austin, Texas startup that sells ultra-lower power chip technology to data centers— closed the largest energy efficiency deal for the quarter. Graduating from the Austin Technology Incubator, the company raised $48 million from a syndicate of investors including: Battery Ventures, Flybridge Capital Partners, Highland Capital Partners, ARM, Advanced Technology Investment Company (ATIC) and Texas Instruments.

Corporate investments and plans to invest in energy efficiency influenced the trend, the Ernst & Young / Dow Jones report suggests. For example, General Electric (GE) said it would invest $432 million over the next four years into research, design, and manufacture of energy-efficient refrigerators in the US.

Overall, corporate investor participation increased from 15% of deals in Q3 last year to about 23% for the same quarter this year. Cleantech deals in Q3 2010 included participation by corporate investors: BASF Venture Capital GmbH, Intel Capital and GM Ventures, which all did two deals apiece.

Beyond energy efficiency, other segments faced a challenging quarter. Venture capital funds going to industrial products and services— which include agriculture, construction, transportation, materials, and general consumer products— fell 72% to $116.9 million, representing a 50% drop in financing rounds to 12. The alternative fuels segment raised $50.5 million in three deals.

Regionally, the report found California’s venture investments in cleantech falling 44% to 21 deal, and by dollar value, falling 71% to $295 million. In comparison, California had five deals over $50 million one year ago, including the $286 million financing of Solyndra.

Massachusetts followed California as largest regional overall investors, with eight deals worth $87.6 million, representing a 50% increase in deals and a 65% increase in capital invested compared to the same time last year.

Article courtesy of TechCrunch

The beloved, endangered IPO is showing signs of revival, or at least survival. In the second quarter of 2010, there were 15 venture-backed IPOs in the U.S., which raised a total of $899 million, according to data released today by Dow Jones VentureSource. The amount raised is nearly four times as much as the same, admittedly moribund, period a year ago, when there were only 3 IPOs and $232 million in exits. So far this year, the total number of IPOs (23) and exit dollars ($1.6 billion) already surpasses the totals for each of the last two years.

Of course, the IPO markets are coming back from a near-death experience so the comparisons look great. The numbers got a big boost from the Tesla IPO on Tuesday, which raised $202 million. (The shares are trading at $24 this morning, 41 percent above the IPO price).

But the IPO market still has along way to go.  The total number of IPOs and money raised is still a fraction of what it was even in 2007, when there were nearly 80 IPOs and more than $7 billion raised.  It’s also never taken longer for a company to go public (at least over the past 18 years since VentureSource has been keeping track).  The median time between founding and IPO for the 15 exits last quarter was 9.4 years.

Meanwhile, in M&A land the number of venture-backed deals in the quarter were down slightly to 79 from 82 a year ago.  But the amount raised through acquisitions was up 48 percent to $4.3 billion.  However, the number of acquisitions and amount raised was lower than in each of the two previous quarters.

http://techcrunch.com/2010/04/01/venture-backed-exit-activity-is-picking-up-again/

Article courtesy of TechCrunch