Here is another great barometer article by Urvaksh Karkaria of the Atlanta Business Chronicle. Even if you’re not in Georgia this shows signs of good economic news for veterans pursuing entrepreneurship. When investors make funds available it shows obvious signs of growth. Regardless of your funding strategy, this is news of interest to you. If you are pursuing equity funding you need to continue your research of funding sources.
Karkaria writes---Venture capital firms invested in twice as many Georgia companies in the first quarter as the same time last year - and pumped in nearly 60 percent more dollars.
Georgia companies raised $188.6 million in venture capital in the first quarter, according to the MoneyTree report. The number of Georgia deals in the quarter doubled to 22 from Q1 2014. Nationally, venture firms invested $13.4 billion in 1,020 deals in the first quarter - the highest first-quarter investment since 2000, according to the MoneyTree Report, published by PricewaterhouseCoopers LLP and the National Venture Capital Association. The first quarter was the fifth consecutive quarter more than $10 billion of venture capital invested in a single quarter.
Signs, however, point to slowing momentum, cautions John Nee, partner in PwC's Atlanta technology practice. The exit markets (IPO and VC-backed M&A) slowed in the first quarter.
Nationally, 17 companies went public in Q1 - the first quarter since Q1 2013 where there were fewer than 20 IPOs in a quarter. Q12015 witnessed 86 VC-backed M&A deals - the slowest quarter by deal value since Q1 2013.
"VC funding lags the public markets so it'll take -a quarter or two for the VC levels to drop if the exit markets continue to slow down,” Nee said.
Georgia ranked seventh out of 39 states in venture capital raised in the first quarter. Three deals - EndoChoice, Ionic Security and Pindrop Security - made 70 percent - $130.9 million –of total venture capital invested in Georgia companies in Q1.
"The companies that have disruptive technology, with a short window to market, are in big data, health care and security - all areas of strength (in Georgia's technology industry)," Nee said. "That's exactly where we saw the (VC) money go."
Locally, later-stage companies drew the majority of investor capital in the first quarter, with seven deals accounting for $70.75 million. Nationally, later-stage deals grew 50 percent in the first quarter, compared to Q4 2Gl4. The surge in later-stage deals could suggest VCs are taking a more cautious approach and backing more mature businesses, Nee said. It could also suggest VCs are attempting to get companies to the finish line (IPO or M&A) in an effort to replenish the exit market, he said.
Deal flow has remained strong in the first quarter following a record number of tech deals, said David Calhoun, partner at law firm Morris Manning & Martin LLP. "We continued to see very strong VC, private equity and M&A activity, particularly in the growth-stage and lower middle market," Calhoun said. "From our perspective, investors are focused on B2B, SaaS-based businesses with recurring revenue and high growth rates."
Tech attorney Jeff Leavitt expressed concerns about "frothy" valuations fueled by aggressive competition among investors for good deals.
"Nothing drives valuations higher than competitive interest, even if unwarranted, which facilitates an ability to absorb larger investment amounts with acceptable dilution," said Leavitt, partner at DLA Piper's Atlanta office. "Higher valuations also may attract larger or later stage funds to look more at venture-type deals, and those funds need to put a minimum amount of capital to work to make an investment worth their while.”