early stage software and Internet companies,” says Mark McCaffrey, global software leader and technology partner at PwC, in a statement today. He attributes the scale of VC activity to the software industry’s high return on investment, combined with the success of recent IPOs and an active mergers and acquisition market.
Underlying the market activity, though, is the bigger trend the Andreessen highlighted in his 2011 essay for The Wall Street Journal:
“More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.”
Indeed, much of the venture funding in software and Internet deals continues to be focused in the Bay Area. In a breakout of venture deals in just two sub-regions—San Francisco-Oakland-Hayward and San Jose-Sunnyvale-Santa Clara—the combined total for investments in software and Internet-specific startups was more than $8.1 billion in 2013, or about 45 percent of the $18.1 billion invested nationwide, according to MoneyTree.
No other sector comes close to getting as much venture capital. The life sciences sector (which combines biotechnology and medical devices) got about $6.6 billion in venture funding in 2013, or 23 percent of the year’s total. In 2012, venture funding in the life sciences amounted to roughly $6.7 billion, or 25 percent of the total for that year.
VCs invested more than $4.5 billion in 470 biotech deals last year, according to the MoneyTree Report. That was about 8 percent more than the $4.2 billion that VCs invested in 2012, and a 2 percent decline from the 478 deals done that year.
Venture firms sank about $2.1 billion into 308 medical device startups in 2013. In the previous year, VCs invested more than $2.5 billion in 322 medical device deals.
In the fourth quarter of 2013, venture activity was up sharply, according to
