Hot Technologies for VCs

February 24, 2014

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Which emerging technologies are attractive to venture capitalists (VCs) right now? PwC’s MoneyTree™ publication enables us to follow the money and get a sense for where investors believe specific industries and lines of business will have a market impact over the course of the next several years.

There is a tremendous investment focus on software, internet and other technology-related categories. In 2013, VC investment in software accounted for over 37% of the total VC investment for the year. Internet investments accounted for roughly 24%. This is a direct reflection of the idea that technology has a significant impact on driving economic growth and profits. Ultimately, this is what VCs are interested in – helping companies grow, drive profits and eventually receive a return for their investment in those companies.

Venture Capital investments by industryQ4 2012, Q3 2013, and Q4 2013PwC/NVCA MoneyTree, Data: Thomson Reuters

Venture Capital investments by industry
Q4 2012, Q3 2013, and Q4 2013
PwC/NVCA MoneyTree™ Report, Data: Thomson Reuters

While software has always been a top focus for VCs, 2013 MoneyTree™ results point to an even deeper focus on software, as the digital age demands that businesses invest in new IT systems that enable more software-defined business models. In particular, as the last decade has brought about tremendous innovation in smaller mobile computing devices, increased broadband access, enterprise automation, and cloud delivery, the last several quarters represent a focus on innovating applications on top of those capabilities.

Within the software investments covered in the 2013 MoneyTree™ report, Big Data Analytics applications play a large role. These analytics-based business opportunities are focused on several key domains: Social and consumer, mobile and location-based applications, as well as larger enterprise and cloud-based applications. In fact, most of the investments are in companies that are, in some way, targeting all of these domain areas as the social-mobile consumer enters the enterprise and drives more interesting and innovative uses of cloud.

Also surfacing in the 2013 MoneyTree™ results is a natural extension of the investments we just discussed. The opening up of the enterprise to consumer devices and data, the increased usage of social and mobile, and cloud data, all bring about the need for more sophisticated security solutions. There is a good deal of venture capital focus in the most recent results on mobile and cloud security applications as companies try to figure out how to secure these new IT platform environments.

To the extent that transitions occur in technology, these transitions are having significant impact across a variety of industries. For example, this past quarter’s numbers demonstrate that technology is transforming business models across Financial Services, Health Care, and Retail and Consumer industries. In particular, businesses focused on disrupting the payments industry via mobile solutions are very much on the VC radar today. Health care solutions around electronic health records and remote patient monitoring are also receiving significant investment interest.

For these industry-focused investments, the key themes are 1) how technology is transforming the business model of traditional processes, and 2) how technology can improve the customer experience.

In summary, the recent MoneyTree™ results highlight the continued focus on software-defined businesses, the growth in use cases around social, mobile, analytics and cloud, and the cross-industry implications that technology innovation and digital transformation are having on businesses of all kinds. Are these themes in-line with the trends and issues facing your business? MoneyTree™ will continue to monitor VC investing to give additional context around the coming innovations and market impact of emerging technologies.

All data and graphs from The MoneyTree™ Report from PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters

Adam Woodyer contributed to this post.

 

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Chris Curran

Principal and Chief Technologist, PwC US Tel: +1 (214) 754 5055 Email

Vicki Huff Eckert

Global New Business & Innovation Leader Tel: +1 (650) 387 4956 Email

Mark McCaffery

US Technology, Media and Telecommunications (TMT) Leader Tel: +1 (408) 817 4199 Email