Venture capital update
Coming on the heels of news that venture capitalists have bought out GE Capital's stake in SAFE Security (we'll have more on that soon), I wanted to give security-industry readers a little more perspective on the venture capital landscape. I'm stealing this from the excellent Dan Primack at PeHUB, whom I've referenced before. This time, however, the information comes from the PeHUB wire, which I can't seem to link to, so I'll just quote the good stuff. Basically, nobody was doling out money in Q1:
Q1 VC Numbers: Oh, The Horror ... Venture capitalists disbursed just $3 billion into 549 companies last quarter, according to data released over the weekend by the MoneyTree three (PwC, NVCA & Thomson Reuters). Thatâ€™s a 47% dollar drop from the $5.7 billion disbursed in Q4, and a 61% drop from the $7.74 billion disbursed in Q1 2008. The number of companies funded didnâ€™t decrease quite as dramatically â€” suggesting that lowered valuations partially helped drive down the dollar numbers â€” but still were off 36% and 43.8%, respectively.This just underscores why I find funding announcements in security so interesting right now. These VCs are being careful with their money, and it shows a bit of faith in a company or technology when they dole out cash to the likes of Aoptix or Orsus or Red Shift or Alarm.com.
Every major industry sector experienced double-digit declines, while the percentage of first-time fundings stayed constant at around 20% (although the value of such deals fell by 48%).It's a testament to just how small the security industry remains that the National Venture Capital Association doesn't even break security out as an industry sector. It's smashed somewhere into these categories: Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Is security an "other"?
The quarterâ€™s busiest firm was Oak Investment Partners, which made 12 investments. Other (quasi) busybodies included SV Life Sciences (11), Draper Fisher Jurvetson (11), Venrock (11), Highland Capital Partners (10), Menlo Ventures (10) and Polaris Venture Partners (10).Interesting that some of the "busy" firms have security ties. Oak was a CoVi investor (not sure how that worked out for them). Polaris and Highland were in on the last Imprivata round. Menlo was in on Intransa and helped Bioscrypt with the A4 deal. Seems like that's good news for the industry. They guys doing deals are familiar with the security biz. But that's really a layman's analysis on my part.