In case your morning commute hasn't clued you in, it was a very good year for venture capital.
Tech investors, like Silicon Valley freeways, are a bellwether for the area's economy. And venture firms in 2013 pumped nearly $30 billion into startups -- a 7 percent uptick over the year before, according to the latest MoneyTree report on the industry's health.
"You have to feel good that we're starting to reach some of the pre-2008 levels. There's a lot more confidence in the market than we'd experienced," said Mark McCaffrey, who heads the global software practice for PricewaterHouse Coopers. The accounting giant prepares the MoneyTree survey with the National Venture Capital Association, using data from Thomson Reuters.
The number of deals also rose vs. 2012, although more modestly. And deals and dollars invested both spiked in the last three months of 2013 compared with the previous quarter.
In fact, the $8.4 billion invested in the most recent quarter was the highest since 2007, before the Great Recession.
McCaffrey credited Wall Street's renewed appetite for initial public offerings of tech stocks, plus a robust mergers and acquisitions scene, for giving venture investors the courage to place bigger bets.
"The amount of deals continues to go up, the average size continues to go up, valuations continue to go up -- all positive signs for the venture community as we head into 2014," he said.
Venture capitalists also seemed inclined to spread the wealth: Nearly a third of all investments last year were made in companies that had never before received venture capital.
On the other hand, the MoneyTree numbers continued to show declining investment in the earliest "seed stage" companies. NVCA president Bobby Franklin said some of that may be due to the increasing number of "angel" investors -- wealthy individuals with the money and appetite to tackle riskier investments.
The trend also may reflect the rise of "crowdfunding," which new federal legislation has permitted as a way for startups to raise money from groups of small investors. But Franklin said he also suspects that some VCs simply are keeping quiet about how many seed-stage companies they're backing.
The new crowdfunding rules are part of a package of securities reforms called the JOBS Act, which John Backus, managing partner of New Atlantic Ventures in Reston, Va., credited for the thriving IPO market. The law also allows companies to take more time before going public.
"What's happening here is that companies are getting bigger and more valuable while they're still private," said Backus, a Stanford graduate. And when they do become publicly traded, he said, they're much less likely to miss quarterly earnings estimates than companies that have gone public with less experience at the helm.
Backus expects yet another massive shift in federal law, President Barack Obama's health care legislation, to create new opportunities for tech companies that can help squeeze costs out of the health system. Meanwhile, another venture capitalist who specializes in health care investing sees bright days ahead for biotech companies.
"2013 was probably the best year for public biotech companies in the last 10 to 15 years," said David Douglass, a general partner at Menlo Park's Delphi Ventures.
With biotech stocks up, and dozens of new companies going public, venture investment in the sector rose last year vs. 2012, to $4.5 billion. That trailed only software, which lapped the field at $11 billion.
Douglass said those big biotech deals were "mezzanine financings" to tide companies over while they prepare to go public. On the flip side, less money went into medical devices, in large part because of concerns over federal regulation.
Venture firms that traditionally have focused on medical device investing, Douglass said, "have not been able to raise more money. I expect this continue in the next 12 to 24 months."
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.
$29.4 billion -- Dollars invested by venture capitalists nationwide in 2013
7 percent -- Uptick over the previous year
3,995 -- Number of deals in which VCs invested
$8.4 billion -- Amount invested in the fourth quarter
$3.2 billion -- Dollars invested in Silicon Valley in the quarter
Source: MoneyTree report