Venture Capitalists Go Big in Michigan, National Deals

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Venture capitalists invested nearly $122 million in 11 Michigan-based companies in the second quarter of this year, marking the largest quarterly investment since the first quarter of 2001.

The numbers, released today by PricewaterhouseCoopers, which operates a large practice in downtown Detroit, and the National Venture Capital Association, show a growing trend in more money being invested in a given contract, says Mark McCaffrey, global software leader and technology partner at PwC.

“It looks impressive from a dollar amount,” McCaffrey says. “But that’s because there were a couple of big deals within the state that drove up the numbers overall. The average deal size is going through the roof.”

Two investments he cites went to ProNAi Therapeutics in Plymouth ($59 million) and Crowdrise, a crowdfunding platform in Royal Oak ($23 million). After that, the next largest investments spanned from $900,000 to $10 million.

In contrast, investors spent $5 million in 13 deals during the second quarter of 2013.

“This is something we’re starting to see across the country — the number of deals will go up and down, but the size of the deals is continuing to grow,” McCaffrey says. “In any geographic region right now, the numbers are being skewed one way or another by one particular deal, so it’s hard to track which area of the country is gaining momentum versus which is not. And I think that’s something we’re going to have to get used to.”

McCaffrey adds that “mega deals,” or contracts worth more than $100 million, are growing in popularity. There were 10 such transactions in the U.S. this quarter and nine in the second quarter. In comparison, there were only 16 for all of 2013.

“Everybody keeps talking about how Silicon Valley skyrocketed this quarter,” McCaffrey says. “And yes, Silicon Valley was up, but there was one deal for over a billion dollars that came out of San Francisco, so everyone’s percentages were down (as a result). It’s the largest once we’ve seen since we starting tracking this.”

On a national level, venture capitalists invested $13 billion in 1,114 deals in the second quarter of this year, according to the MoneyTree Report. This marks the largest quarterly investment since $13 billion was invested in the first quarter of 2001.

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