According to a MoneyTree report by a special partnership between PricewaterhouseCoopers and the National Venture Capital Association, venture capitalists had shifted its sight from making expansion-stage investments to placing seed investments. The report was based on data compiled by Thomson Reuters, who is also the publisher of Venture Capital Journal.
An increase in seed investments was seen in the third quarter of this year, rising to 42% from the previous year. Also 29%, or almost a third of Silicon Valley deal had been seed fundings. This was the result of a study from GLG Share, Orrick Herrington & Sutcliffe, CB Insights and Silicon Valley Bank. Although it was the same percentage increase since last year, seed investing in that area fared better than in 2011 and 2009, wherein increase in seed investments were seen at 12% and 9% respectively.
According to the definition provided by a report on Forbes newsmagazine, seed investments are financing made on early-stage startups by an angel investor, venture capitalist, or a combination of both.
Although this was seen as a positive sign by the private equity sector, a Forbes newsmagazine cautioned prospective investors to not rely on such report and other similar data alone. Martin Zwillig, who is a founder and chief executive of startup founder services provider Startup Professionals, said the risks associated with placing seed investment would be reduced should an investor knows the viability of the company as an organization and as a product maker or service provider in the market. This rings especially true in terms of follow-on or alternate financing should a company requires one for growth purposes.
Zwillig said the top business sectors where high venture capital activity has been seen are the Internet, healthcare, mobile and telecommunications. Although green technology has not picked up traction, Zwillig said renewables like solar and wind power had been the main force behind venture capital activity in green technology.
Join the Conversation