Young Bucks or Oldies But Goodies: What stage is attracting capital?

Last month, the NVCA reported 1Q 2013 venture capital investment data.  Venture capitalists invested $5.9 billion in 871 U.S.-based companies.  Many of the startups attracting the media’s attention are bootstrapping their existence.  Are those the companies receiving venture investment?  Not exactly.  Take a look at the data below.

We caught up with Venture Partner Alan Ying to discuss the data.

Q:  Most of the companies receiving venture investment in Q1 are fairly developed companies (beyond the startup/seed stage).  As an early stage investor, is it troubling that most VCs are investing in expansion and later stage companies?

Alan Ying:  No, innovation continues to remain strong.  Comparing early stage and later stage companies is like comparing apples and oranges — each stage company uses venture capital investment differently to build their company.  Generally speaking, early stage companies are typically getting their product / service off the ground.  Later or expansion stage companies are building multiple product lines, which can be more capital intensive — which is why you see more capital invested in those later stage companies.  These companies are usually 3+ years old.

Q:  What else can you tell us about this data?

Alan Ying:  Well, venture capitalists are long term investors, so looking at a single quarters’ data doesn’t provide a complete picture of the startup market.  It is good to see a bulk of the attention is given to early and expansion stage deals — this is where VCs can add the most value.  During these stages, companies are being developed from an idea and growing.