18,795 Investors 
As a follow-up to our earlier post regarding strong investment growth in Internet and Mobile during the month of May, we wanted to present a complete US May funding roundup based on deal flow information captured by the ChubbyBrain platform. Here are the high-level investment figures for May in the United States:
- 210 total deals totaling nearly $2.05B in investment
- Fundings spanning 10 different sectors and over 30 different industries
- Funding rounds including seed, angel, debt, and Series A through Series F
In this post, we performed a deeper dive into four areas of the data, specifically: (1) geography (2) industry/sector (3) round type and (4) investor. We’ve explored each of these categories in abbreviated detail, and as always we’d love to hear your own follow-on thoughts or ideas on what we’ve provided here.
Geographic Breakdown
In May, 77 of 210 total deals (or about 37%), went to companies in California. The combined total deals of the next four leading states-Massachusetts (29), Washington (23), New York (14), and Colorado (8) - doesn’t add up to the number of funding deals in California.
Shifting our focus to dollars instead of deals, May’s figures showed that about $764M of $2.05B total national investment (or about 37%) flowed into California startups. This percentage actually decreased compared to April, where over 50% of total dollars invested were in California. Helping push California’s total funding numbers to the top this month were Oak Investment Partner’s $40M financing of cancer diagnostic testing company Clarient, and Digital Sky Technologies’ $200M in Series D round funding for Facebook, the largest amount raised in a single round this month.
Interestingly, both in terms of number of deals and dollar amount invested, 5 states alone accounted for over 70% of the nation’s funding activity in May, a pattern that we find when observing April’s data, too. The other remaining 30% was comprised of funding instances across 23 other states.
Industry/Sector Breakdown
The Internet and Healthcare sectors together represented 61% of the total number of deals in May, with 66 and 62 deals respectively. Although both sectors were roughly even in number of deals, Healthcare companies raised twice as much money from investors than Internet companies did, accounting for more than 50% of total May funding. This is logical given the typically greater capital needs of healthcare-oriented startups coupled with the decreasing costs of internet ventures. That said, the difference in investment levels between the sectors is stark and the disparity between Healthcare and Internet investment increases to 4:1 if we strip out the two biggest Internet deals for the month, Facebook and Fotolia (details below). In absolute terms, the Healthcare sector raised more than twice as much money in May than it did in April, with total Healthcare investment increasing from $456.54M to $1.03B.
A closer look within the healthcare sector data reveals that the majority of the deal flow stemmed from companies in the Biotechnology and Medical Devices & Equipment industries, representing 25% and 39% of total healthcare investment, respectively. North Carolina-based Cempra Pharamceuticals raised $46M in Series C round funding for its antibiotics business, while Pennsylvania-based firm Small Bone Innovations pulled in close to $73M in Series D round funding for its orpthedic devices business.
The internet sector was largely dominated by new funding in the service industry, which constituted 86% of this month’s $495.5M of total internet investment. Leading this month’s service industry investment was TA Associates’ $75M first round funding of microstock photograhpy website Fotolia, and also Battery Ventures, Scale Venture Partners, and Montagu Newhall Associates’ new $70M financing of ExactTarget, an email marketing firm. It’s worth noting that although this was Fotolia’s first round of institutional funding, defining it as a Series A event, the company has been operating on a self-funded basis since 2005.
Round Type Breakdown
What type of funding was most prominent during May? In terms of number of deals, May drew in a high volume of seed funding events with 34 seed rounds, a number that includes the 20 Facebook fbFund winners for 2009. April would have seen a high number of seed rounds if we add back excluded funding data from university business plan competitions-52 seed rounds to be exact, a natural result of the school year cycle.
Series A funding dollars more than doubled from April to May, jumping from $218.75M to $455.73M. This number received a big boost from Clovis Oncology, an anti-cancer agent development firm that raised $145M this month in start-up financing from New Enterprise Associates, Versant Ventures, Aberdare Ventures, Abingworth Management, and ProQuest Investments. The high amount of Series D Funding in May comes from, as previously mentioned, Digital Sky Technologies‘ $200M investment into Facebook.
*Includes 5 Series A deals of $20M or more. In some cases this represented actual startup funding and in other cases later-stage growth funding that constituted the companies first external round of institutional investment.
Investor Breakdown
Aside from the Facebook fbFund, about 21 investors showed high activity in May, either leading or co-investing on 3 or more different deals. Looking at the dollar amount raised, previously mentioned investors such as Digital Sky Technologies, New Enterprise Associates, and Abingworth Management led in funding the largest deals for May.
Juxtaposing both the quantity of deals and quantity of investment together, five VCs stand out as the most active investors for the month. Highlighted in green, InterSouth Partners, Morgenthaler Ventures, Oxford Bioscience Partners, Alta Partners, and Three Arch Partners all participated in three or more deals and provided over $77M to start-ups in May. Alta Partners, for instance, raised an average of $30.2M for biotech companies Avid Radiopharmaceuticals, Taligen Therapeutics, and Calistoga Pharmaceuticals. Interestingly, 16 of the 18 investments made by these five VCs were in healthcare companies specifically, following the sector trend we observed earlier.
The May analysis raises interesting questions about expectations for future VC funding. Will investment in the healthcare industry continue to dominate relative to other sectors? Will growth in VC funding remain concentrated in only a handful of states, or will we begin to see more deal flow diffuse to other regions as well? What other trends do you expect to see continue or be broken?
We’d love to hear your insights and look forward to seeing them in the comments.
If you feel we’ve missed a deal or any funding data on your company, please lets us know through the comments or through email at team(at)chubbybrain.com and we’ll include them as we update our analysis.
June 18th, 2009 at
Terrific article, thanks Chubby Brain!
There are a couple of things that jump out to me from this article. The first is the lack of VC funding in Texas. As far as I can remember, Austin always served as a mini-silicon valley, with a tremendous number of tech start-ups and internet companies. Has growth and development fallen off the map in that area? Is there less innovation taking place in Austin? Is there some systemic reason VCs are avoiding the area?
Second, I do not know much about where the funding for Facebook is going, but I think it is remarkable that Facebook is still looking for VC money, especially this far out of the nascent stage. The fact that Facebook is not generating enough revenue and/or profits to be self-sustaining and enable internal growth is extremely worrisome for the future of social networking. Is social networking unprofitable by nature? Is there a pot of gold at the end of the rainbow, or are social networking sites like Facebook, MySpace, and Twitter doomed to be unprofitable?
June 19th, 2009 at
Sal,
Thanks for the kind words about the analysis and for your very thoughtful comment.
Overall, venture investing, as you probably have heard, is down across the board and is at an interesting crossroads of sorts overall. That said, we did see over $20M in funding going to Texas based startups. We cannot point to any systemic issue specific to TX but there are a couple of reasons that may account for the amount of investment in TX:
* More early stage investing. Seed and series A rounds are generally smaller rounds and as many investments in Texas fell into this category in May, this resulted in a smaller level of investment relative to other states. From an entrepreneur’s perspective, this may actually be viewed as a positive for Texas as it shows that investors in the state are still willing to fund riskier, early stage ideas.
* More investment in technology, software and internet. The top states in the analysis had significant investments in more capital intensive sectors such as healthcare and energy and as a result, this leads to some very large deals which drive many of the statistics we showed in this analysis. In fact, there were several $25M+ deals in the month of May.
Lastly, we’d caution against extrapolating any sort of trend from this single data point. As we see the data over the next several months and quarters, you/we should be able to discern general venture capital funding trends for the nation as well as Texas and draw hopefully draw some good conclusions from that.
Re: your point and question about Facebook and social networking overall, this is the million (or perhaps billion) dollar question many people are asking. We recently attended a monetizing social media event hosted by Battery Ventures where sr execs from Facebook, MySpace, etc were speaking as part of a panel Battery assembled. We can say that there are a great many very smart people with some very compelling ideas/approaches working on figuring the answers to these questions out. To this point, “the answer”, however, hasn’t been found. Time will ultimately tell if they can translate their massive audience into a “self-sustaining model”.
Thanks again Sal for the great comment. We look forward to hearing your thoughts on this and other topics in the future.
Warm regards,
The Chubby Research Team
team(at)chubbybrain.com
June 19th, 2009 at
Interesting graphs.
The interesting part about Facebook is that they are taking VC money to become VC. That must increase their cost of the funding.